According to the UN World Economic Situation and Prospects report, least developed nations are projected to grow by 4.1% in 2023 and 5.2% in 2024, significantly less than the 7% growth projected in the 2030 Agenda for Sustainable Development.
The report, released on Tuesday, emphasised the risks of an extended period of low growth amid persistent inflation, increasing interest rates, and increased uncertainty, in addition to the ever-worsening effects of climate change.
Global Overview
As per the report, the global economy is expected to grow by 2.3 % in 2023 and 2.5 % in 2024, representing a modest increase in worldwide growth.
It attributed the increase in growth to the strong household spending in major economies, particularly the US and the EU, and recovery in China. Overall, however, global growth is expected to drop from 3.1% in 2022 to 2.3% in 2023 (up from 1.9 per cent in January).
The global economy continues to gain momentum, with growth increasing by 2.5% in 2024, with inflationary pressures easing in the second half of 2023, the report found
However, it also highlights that structural challenges such as pandemic scarring, weak investment, growing debt vulnerabilities, and funding shortages remain unresolved. In this respect, the report warns that the global economy faces the prospect of a prolonged period of poor growth.
Global Inflation Will Reach 5.2% In 2023 - UN Report #MENAFN #Bitcoin #LatestNews #BreakingNews https://t.co/Fx22UJ4AFW pic.twitter.com/IjPIvTBG0i
— MENAFN Business (@MENAFN) May 17, 2023
Meanwhile, international financial markets have remained resilient despite ongoing banking sector disturbances in the US and Europe. The collapse of Silicon Valley, the 16th largest bank in the United States by total assets, and Signature Bank, as well as the Swiss government-brokered purchase of Credit Suisse, a globally systemically significant bank, rattled financial markets worldwide in March 2023.
The world’s three major economies — the US, Europe, and China — have seen favourable short-term prospects, in contrast to many developing nations, for which growth predictions are much lower. The report attributes this to tightening lending conditions and growing external finance costs. The gross domestic product (GDP) per capita in Africa, Latin America, and the Caribbean is expected to expand very little this year, continuing a longer-term stagnant economic performance.
The least developed nations are expected to expand by 4.1% in 2023 and 5.2% in 2024, significantly less than the 7% growth target outlined in the 2030 Agenda for Sustainable Development.
Geopolitical tensions, declining global demand, and stricter monetary and fiscal policies continue to pressure worldwide trade. International trade in goods and services is projected to increase by 2.3% in 2023, declining by 0.4%, down from 6% in 2022, and compared to an average growth rate of 4.5 percent between 2000 and 2021.
Amid weak growth prospects, UN DESA Head Li Junhua calls on the global community to close the financing gap in many developing countries so that they may build capacity & achieve inclusive & sustained long-term economic growth.
— UN DESA (@UNDESA) May 16, 2023
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Persistently High Inflation
Moreover, the report found that inflation has remained stubbornly high in many nations, despite a significant drop in worldwide food and energy costs over the last year. Global inflation is expected to average 5.2% in 2023, down from a two-decade peak of 7.5% in 2022.
Since the middle of 2022, several factors have contributed to a decline in global food prices; one is the resumption of exports from Ukrainian ports under the Black Sea Grain Initiative. In March 2023, the FAO Food Price Index decreased by 20% year-over-year to 126.9, the lowest level since July 2021.
In developed nations, headline inflation is expected to gradually fall from 7.8% in 2022 to 4.8% in 2023, but it will continue to be well above central bank targets, typically around 2%. While headline inflation has been declining, core inflation in the United States and Europe have remained high, primarily due to increasing service costs (e.g., housing, insurance, and transportation) and robust wage growth.
In most developing nations, inflation is also declining due to decreasing commodity prices, reduced global supply limitations, and devaluation pressures. However, annual inflation will continue to be significantly higher than the long-term average, particularly in Africa, South Asia, and Western Asia.
The World Bank estimates that in nearly 90% of developing nations, food inflation in early 2023 remained over 5%.
As stated in the report, consistently rising inflation in developing nations with large numbers of people living in poverty is an additional barrier to eradicating poverty. Emerging data from countries hit by the current wave of high food prices confirms previous findings that the resulting hunger and malnutrition more severely impact women and children.