Global Macroeconomic Prospects

Medium-term growth prospects are clouded by scarring from the pandemic, the ever-worsening impact of climate change, and structural macroeconomic challenges, such as anaemic investment and mounting debt vulnerabilities.

The world economy is in the doldrums, with weak economic growth, stubborn inflation and rising interest rates in the major developed economies clouding the near-term economic outlook. Legacy effects of the COVID-19 pandemic, the protracted war in Ukraine, exacerbating effects of climate change are impeding a rebound of global growth.

As we enter May 2023, the global economic situation remains highly uncertain amid an extraordinary confluence of recent shocks that have affected countries across the world.

Monetary policy cycles in developing countries will increasingly diverge in 2023 as several central banks are expected to further raise interest rates, while others may find policy space to hold, or even cut, rates.

The lingering war in Ukraine has been weighing on global economic activity since early 2022, undermining post-pandemic recovery. The initial impact of the conflict on energy and commodity prices appears to have waned, although some risks on the supply side may re-emerge, and challenges to Europe’s energy security remain.

Persistently high inflation in both developed and developing economies is eroding real incomes. External financing conditions for developing economies have deteriorated due to the monetary tightening measures to counter inflation in developed economies.

Multiple shocks to the world economy The world continues to confront multiple, inter-connected crises. Amid a slow recovery from the impact of the COVID-19 pandemic, the world is facing a food and energy crisis exacerbated by the war in Ukraine, with r ...

It is crucial for central banks to maintain a “nominal anchor” to stabilize inflation expectations. Currently, exchange rate targeting, monetary aggregate targeting, and inflation targeting are used as nominal anchors.

Governments, households, and firms across Europe are grappling with the energy and cost-of-living crisis. The recent decline in natural gas prices has, however, fuelled hopes that massive gas shortages, rationing, and industrial shutdowns can be avoided.