A bleak outlook for the global economy

The global economic outlook looks bleak. Persistent high inflation, aggressive monetary tightening, and uncertainties from both the war in Ukraine and the lingering pandemic has battered and bruised the global economy. In addition, soaring food and energy prices are eroding real incomes, triggering a global cost-of-living crisis, particularly for the most vulnerable.

Growth in the United States, China and the European Union is weakening, with significant spillovers to other countries. Many developing countries are fighting an uphill battle to fully recover from the pandemic, with high inflation, rising borrowing costs and the slowdown in the major economies further hurting their growth prospects.

Despite the windfall of high commodity prices for the commodity-exporters in Africa and Latin America and the Caribbean, growth remains largely insufficient to mitigate the slack in labor markets. Furthermore, a global food crisis is unfolding in many developing countries, with low-income countries in Asia and Africa particularly at risk.

The global economy is projected to grow between 2.5 and 2.8 per cent in 2022, a substantial downward revision from UN DESA’s previous forecasts in January and May. Most forward-looking indicators now suggest a further slowdown in global growth in 2023.

Persistent and high inflation have returned with a vengeance in many developed and developing countries. The United States Federal Reserve and many other central banks have raised their policy interest rates at a rapid clip in recent months. The rise in borrowing costs is not only increasing fiscal consolidation pressures but also risks of sovereign defaults among developing economies, particularly in low-income countries.

The pandemic, the global food and energy crisis, the ever-worsening climate catastrophe, and the looming debt crisis in the developing world are testing the limits of current multilateral frameworks. A strengthened and effective multilateral cooperation remains critical to stimulate growth, support the most vulnerable and put the world economy on track towards sustainable development.

Learn more in the September Monthly Briefing on the World Economic Situation and Prospects available online on 1 September 2022.

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