The World Economic Situation and Prospects 2023 report was recently released by the United Nations Department of Economic and Social Affairs (UN DESA) in collaboration with five UN regional commissions and the United Nations Conference on Trade and Development (UNCTAD). This report provides a comprehensive evaluation of the multiple economic shocks faced by the world due to the COVID-19 pandemic and the Ukraine War. The report also highlights the slowdown of the global economy and high interest rates, which are expected to decelerate the GDP growth rate of India in 2023.
Key Findings of the Report
Inflation
The report highlights that the average inflation rate across the world was 9% in 2022, leading to budgetary constraints in both developed and developing countries.
Recession
The current downturn has slowed the pace of economic recovery from the COVID-19 crisis, putting several countries at risk of recession in 2023. Most developing countries have seen a slower job recovery in 2022, with women’s employment not being fully reversed.
Slight Growth in Global Output
The report predicts that the world’s output growth can bounce back to 2.7% in 2024, provided there is a change in the war situation and the supply chains are not disrupted.
South Asia’s Economic Outlook
The economic outlook for South Asia has significantly deteriorated due to high food and energy prices, monetary tightening, and fiscal vulnerabilities. The average GDP growth is expected to moderate from 5.6% in 2022 to 4.8% in 2023.
Russian Export
The report states that Russian exports increased in 2022 as trade with China, India, and Turkey surged.
Indian Prospects
Growth Rate
The report predicts that India’s growth rate will remain strong at 5.8%, slightly lower than the estimated 6.4% in 2022. India’s food and energy subsidies have prevented a major downfall. India is expected to grow at 6.7% in 2024, becoming the fastest-growing major economy in the world.
Inflation
The report states that the annual inflation in India was estimated at 7.1% in 2022 and is expected to decelerate to 5.5% in 2023 as global commodity prices moderate and slower currency depreciation eases imported inflation.
Unemployment
The report highlights that the unemployment rate in India declined to pre-pandemic levels in 2022, indicating strong domestic demand. However, youth employment, particularly among young women, remained below pre-pandemic levels.
Recommendations
Calibration of Macroeconomic Policies
The report recommends that macroeconomic policies need to be carefully calibrated to strike a balance between stimulating output and taming inflation.
De-anchoring of Inflation Expectations
The report suggests that central banks will need to pursue a deliberate and comprehensive process to avoid losses in credibility and de-anchoring of inflation expectations while reforming existing frameworks.
Reprioritize Public Expenditures
The report recommends that governments need to reallocate and reprioritize public expenditures to support vulnerable groups through direct policy interventions.
Scale up SDG Financing
The report calls for a stronger international commitment to expand access to emergency financial assistance and scale up SDG financing for strengthening social protection systems and providing continued support through targeted and temporary subsidies, cash transfers, and discounts on utility bills.
