Global Growth Outlook Downgraded As Davos Meets – Commentary

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IMF Managing Director Kristalina Georgieva, attending the World Economic Forum in Davos, has warned about a downgraded outlook to economic growth in 2023.

This reflects a similar conclusion put forward by MAPFRE Economic Research, which has cut its own outlook for global growth to 2% from 2.7% previously expected, amid a warning of “global stagflation”.

However, it is also important to note outliers from the overall projections. MAPFRE predicts a sharp downturn in growth in the eurozone in the first quarter of 2023, but it also says that Spain will escape the predicted recession.

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2023 Global Growth Outlook

Among key points highlighted in MAPFRE’s 2023 Economic and Industry Outlook are:

  • European Industry

It is feared that European industry will fall into decline if the energy crisis cannot be resolved, as investors may turn to countries with cheaper energy. In addition, there is a risk that the economic contraction will be exacerbated by the monetary stance of the European Central Bank (ECB).

These problems mean that, on an annual basis for 2023, the growth forecast for the region is -0.1%, down from 0.0% in the previous report. The hardest hit country in the region will be Germany, with a year-on-year contraction of -0.9% due to a slowdown in consumption, lower industrial production, and a slump in exports.

  • Spain

Spain will be one of the few European economies to be spared the recession despite a small contraction in the early months of the year. Experts believe that GDP will come to 1.0% in 2023, four tenths of a percentage point higher than the forecast in October 2022.

The improvement is due to the tax incentives that have been provided and the still acceptable financial costs. Also, an upturn of 2.1% is expected for 2024. Despite these projections, the outlook is for the ECB to continue tightening monetary policy, which could lead to a downturn in consumption due to a loss of purchasing power and a contraction in credit.


  • Asia

While Europe faces bleak prospects, Asia looks set to contribute to global growth. China is expected to return to a somewhat higher growth rate in 2023 (4.8%) now that the zero-Covid policy has ended. Indonesia and Japan will also grow this year by 4.5% and 1.1%, respectively.

Beyond this region, the United States will also avoid a contraction of its economy, with its GDP rebounding by 0.1%. However, this will depend on how investment, the real estate market, and the labour market react to more expensive financial conditions.

The US economy faces two latent risks: a recession triggered by tightening financial conditions and a liquidity crisis in the markets similar to the “repo” crisis of 2019, when the Federal Reserve was forced to act.