World economic performance in '22 exceeds prior expectations: McKinsey

In most analyses, a slowdown of short duration is predicted for 2023, resulting mainly from stagnation in the developed economies, with a rebound in 2024.

The economies of the US and the eurozone demonstrated resilience in the second half of the year. The US economy expanded at an estimated 2.9 per cent in the fourth quarter and 2.1 per cent in 2022 overall. The eurozone economy avoided a predicted contraction in the fourth quarter, expanding by 0.1 per cent beyond the previous quarter and 3.5 per cent for the year, as per McKinsey’s report.

From the world’s largest emerging economies, comparatively robust growth is expected for 2023. In India, where GDP expanded 8.7 per cent in fiscal 2021-22 (March to April), the official GDP growth estimate for fiscal year 2022-23 is 7 per cent.

In China, the pace of economic expansion slowed from 8.4 per cent in 2021 to 3 per cent in 2022. The main cause was disruption connected to the ‘zero-COVID’ policy, but weaker global demand and rising geopolitical uncertainty magnified the headwinds. China has since lifted key pandemic restrictions. At the World Economic Forum’s annual meeting in January, Liu He, China’s vice-premier and top economic adviser, welcomed foreign investors, emphasising that China’s economy was set to improve significantly in 2023. The IMF recently upgraded its growth estimate for China in 2023 to 5.2 per cent, and early economic data are directionally supportive.

Recent global economic data have been mixed, reflecting both improved conditions and persisting downside risks, largely centring on inflation and geopolitical uncertainty. Inflation has begun to slow in both developed and emerging economies. Energy prices have come down, but core inflation readings remain high, and central banks are sustaining a course of policy tightening. The US Federal Reserve implemented a small rate rise on February 1 (one-quarter point), bringing the policy interest rate to 4.5-4.75 per cent. The Fed also signalled that further increases can be expected in 2023. On February 2, the Bank of England lifted its key interest rate three-quarters of a point, to a range of 3.5-4 per cent, the highest it has been in 14 years. The European Central Bank, meanwhile, raised its key refinancing rate by a half point, to 3 per cent.

Consumer confidence improved globally and in most surveyed economies, though the prevailing surveyed mood falls well short of optimism. High prices and consumer caution continue to constrain retail sales in surveyed economies.

Amid weaker demand and high input costs, the global purchasing managers’ indexes (PMIs) for manufacturing finished the year in shallow contraction (48.6). PMI readings for individual economies were likewise contractionary in December, with the notable exception of India, where the reading for manufacturing was robust (57.8).

Fibre2Fashion News Desk (DP)