The global economy defied expectations in 2023, showing more resilience than anticipated. Despite facing hurdles like high inflation, rising interest rates, and geopolitical tensions, a recession was thankfully avoided.
Developed economies, like the US, performed well but are expected to see a slowdown in growth throughout 2024. Indeed, Chairman Jerome Powell had assured by the beginning of the year 2023 that the Federal Reserve would persist with rate hikes until achieving economic stability and getting inflation to reach its 2% target. As such, economists had predicted a looming U.S. recession, compounded by bank stress, debt ceiling debates, government shutdown threats, and global geopolitical tensions. Fast forward to today, inflation has more than halved while maintaining resilience in economic growth. As a result, economists are now predicting a soft landing scenario, while the Federal Reserve envisions three rate cuts in the upcoming year.
Europe faced a challenging year with both high inflation and interest rates. The Central Bank had opted to tighten its monetary policy, resulting in a remarkable downturn in inflation from 8.6% in January 2023 to 2.9% by December 2023. This shift signifies the concerted efforts to balance economic stability while addressing inflationary pressures. In contrast, Japan might see slower growth despite government efforts to stimulate the economy as Japan had opted to maintain an ultra-loose policy throughout 2023. BOJ Governor Kazuo Ueda’s cautious approach reflects a deliberate stance, balancing the need for economic stimulus against the potential challenges of negative interest rates.
The outlook for developing countries is varied. Africa’s growth is expected to remain weak, while South Asia, led by India’s strong performance, is anticipated to experience steady growth. Overall, IMF projected that global growth will stay at 3.1% in 2024, same as in 2023. Although the worst-case scenario of a looming recession didn’t materialize, a period of sluggish growth appears to be on the horizon. On another note, global inflation, in its turn, is still high despite recent softening driven by lower prices of food and energy but core inflation has not yet peaked in many countries. As such, IMF expects that Inflation’s return to target is unlikely before 2025 in most cases.
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Overview of the Global and Lebanese Economy in 2023