In 2022, the global GDP growth rate was 3.2%, down from 6% in 2021, with many countries facing the risk of recession including the global powerhouses. Several factors slowed down the global economic recovery that started in 2021. These included the Russia-Ukraine war, China’s shutdown, oil price increases, and global inflation.
Despite the IMF projecting a further weakened global GDP growth rate in 2023, this article highlights some positives for the global economy in 2023. Global economic actors are optimistic about 2023 owing to bullish stock markets, China’s end to its zero-COVID policy, and a drastic drop in natural gas prices.
1. Stock Market Recovery
In December 2021, the MSCI All Countries index which measures equity performance in both developed and emerging markets was at 100, however, by October 2022, it fell below the 75 mark. 2022 was its worst performance since the 2008 global economic crisis. The first 3 weeks of January 2023 have seen the index rally to the 85 mark.
In 2022, investors lost a record $18 trillion in the global stock markets with the major contributory factor being the interest rates hike by the US Federal Reserve. However, investors are quite optimistic about 2023, with 71% of the respondents in a Bloomberg survey expecting equities to rise in 2023.
2. Gas Prices Have Fallen
Before the winter of 2022, there was great panic over the price of natural gas as there was a shortage of gas supply from Russia to Europe. However, the climatic conditions in Europe over the winter led to declining demand for gas among European households, leading to a massive fall in gas prices. According to the US Energy Information Administration, gas prices in the US fell to pre-invasion levels in January 2023.
Apart from gas prices falling, there is also a projected record oil demand by the International Energy Agency especially as China reopens from COVID restrictions. A fall in gas prices and an increase in oil demand is definitely a good sign for the global economy.
3. Heightened Optimism Among Politicians
Despite fears of a recession among economists and commentators, political leaders worldwide have adopted a more optimistic outlook toward their different economies in 2023. For example, Olaf Scholz, the Chancellor of Germany in an interview with Bloomberg TV reported that Germany would not enter into a recession.
According to Scholz, “I’m absolutely convinced that this will not happen that we are going into a recession.” In addition, Liu He, the Chinese Vice-Premier, predicted a rebound in the Chinese GDP growth rate to 5.5% from 3%. However, the US Treasury Secretary, Janet Yellen warned that the US could be heading for a recession if they default on debt payments.
The IMF also expressed optimism in its messaging for 2023. In 2022, the institution warned that 2023 was going to be a tougher year for the global economy. However, Kristalina Georgieva, the Managing Director of IMF recently said “it is less bad than we feared a couple of months ago.”
4. China is Reopening
In the past, China did not have a significant impact on the global economy, however, as the country keeps expanding its economy, China is becoming a significant feature in the global economy. Since China is the world’s largest exporter, the zero-COVID policy and corresponding shutdowns caused significant disruptions to the global supply chain.
With the reopening of the Chinese economy, it is expected that shopping and traveling will resume more expressly across China. This will lead to increased demand for goods across China, and the corresponding effect will be increased prices of goods globally.
How About Nigeria?
The World Bank forecasted a GDP growth rate of 3.1% for Nigeria in 2023, the IMF forecasted 3.0%, the African Development Bank (AfDB) predicted 3.2%, and the Nigerian government predicted 3.6%. What are the positives for the Nigerian economy in 2023?
With an upcoming election, projected increased oil production, as well as a possible stop to petroleum products importation, there are a couple of factors to watch out for in Nigeria’s economy in 2023. As the government seeks to raise as much as N4.8 trillion from the local bond market, what effect will this action have on the nation’s equity markets, and in turn, the economy