The outcomes of 2023 demonstrated that the economy, despite all negative factors, showed its resilience and avoided the worst-case scenario—a recession. However, amid decreasing investment levels, trade slowdown, and other risks, economic growth is expected to decelerate in the next two years.
From the UN report on the USA:
“A prolonged period of high interest rates will lead to a reduction in aggregate demand, an increase in defaults, and a sharp correction in asset prices, especially in developed countries, thereby further undermining growth dynamics. Higher interest rates in developed countries will hinder capital inflows to developing countries or even provoke capital outflow, complicating the situation with the balance of payments and creating risks for debt sustainability.
Besides raising interest rates, the Federal Reserve of the USA, the European Central Bank, and other central banks of developed countries have also begun to reduce the money supply and liquidity, initiating what is called “quantitative tightening,” by reducing assets on their balances, which surged during previous episodes of so-called “quantitative easing,” starting in 2008. Many developing countries have not yet recovered from the pandemic. Global trade and industrial production remain exceptionally sluggish.”
The forecast is for 1.4% economic growth in 2024 and 1.7% in 2025. There is a wide range of uncertainty factors, for example, elections.
From the UN report on China:
“In 2023, economic growth was 5.2%, which represents a significant leap after just 3% growth in 2022.
Since 2020, 66 construction companies in China have declared default, including five in the first half of 2023. A leading indicator of economic activity, the purchasing managers’ index in the manufacturing sector, has been in the contraction territory since April. While consumer spending remained stable, industrial production was volatile, facing instability in the real estate sector and weak external demand.
The housing market accounts for about 25 percent of China’s GDP, and Chinese developers have taken on unjustifiably large amounts of debt, resulting in regulatory measures against bad debt leading to the bankruptcy of many of them, affecting consumer and business sentiment.
Real estate investments in China fell by another 9.1% in the first three quarters of 2023. Ongoing trade tensions with the United States have also weakened demand for Chinese exports. China’s share in total goods exports to the United States dropped sharply after the United States began imposing tariffs and quotas on imports from China starting in 2018.”
The forecast is that China’s economic growth will slow down, approximately to 4.7%. However, weak inflationary pressure allowed for the easing of monetary policy, lowering the interest rate to stimulate domestic demand. The government is also trying to stabilize the real estate sector.
Extended comments by Grigor Agabekyan, a staff member of the UN Department of Economic and Social Affairs, can be read on the UN website.