Global real GDP is expected to grow 2.5% in 2023—an increase from the 2.3% growth forecast in Q1. Inflation forecasts continue to show a downward trend from 2022 at 6.9% this year but remain well above historical levels. Businesses and consumers face prolonged price pressures that constrain purchasing power.
Elevated inflation combined with higher interest rates continue to impact advanced economies. Stress in the US banking sector since Q1 added risk and uncertainty to global growth. At the same time, several emerging economies, especially in Asia Pacific, will maintain considerable momentum and stand to gain from China’s recovery. The substantial growth discrepancy between advanced and emerging markets creates a multi-speed global economy in 2023.
Emerging markets fuel economic prospects China’s rebound will support global growth and add further momentum to a region that has seen continuous economic expansion. Economies in Asia Pacific, including India, Indonesia and Vietnam, continue to surge despite multiple headwinds. Global growth is further supported by other emerging markets, particularly the Gulf countries.
Although energy prices have largely normalized, food remains heavily inflated, which has a pronounced impact on developing economies. Cost pressures in advanced economies have turned sticky due in part to wage growth, consumer spending and rising inflation expectations. Gradual moderation is expected to endure in 2024 from monetary tightening, cooling labor markets and depleting pandemic-era savings. However, supply-side strains mean global inflation won’t stabilize until 2025.
The main scenario threatening the global economy is stagflation: a stagnation in economic activity combined with high inflation.
Vietnam Showing Substantial Growth
As reported by S&P Global’s Daily Update on June 15th, “Like the rest of the world, Vietnam’s economy declined under the COVID-19 pandemic. When lockdowns were implemented in mid-2021, GDP growth in Vietnam slipped to 2.6%, following 2.9% growth in 2020, the first year of the pandemic. However, Vietnam is one of several export-dependent emerging market economies that roared back in 2022. The country’s real GDP grew 8.0% year over year in 2022 as domestic demand and manufacturing export production returned.”
