Economists warn of global economy slowdown for a decade

Economists have warned of a possible economic slowdown, and according to Daniel Lacalle, chief economist at Spanish asset management company Tressis Gestion, the global economy is likely to face a decade of sluggish growth, as economies around the world grapple with several shocks – from the invasion of Russia to Ukraine points to China’s ongoing measures to stem the spread of the COVID-19 virus – which have led to higher inflation and dampening economic activity.

The International Monetary Fund expects global GDP growth to slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. The fund described this as “the weakest growth since 2001 except for the global financial crisis and the acute phase of Covid-19 pandemic

Meanwhile, global inflation is expected to rise from 4.7% in 2021 to 8.8% this year before falling to 6.5% in 2023 and 4.1% by 2024, remaining above the target levels of many major central banks, according to CNBC

Lacalle said the possibility of a full reopening of the Chinese economy was the “biggest positive sign” that markets could expect for 2023.

“We were looking at a very bleak picture of the Chinese economy, which is essential not only to the growth of the rest of the world but especially to Latin America and also to Africa,” he said. Pointing out that “it is certain that the reopening of the Chinese economy will give a big boost to growth around the world, but also – and it is a very important factor – that German and French exporters feel the impact of the closure and the weakening of the profit environment in China, and this will certainly help a lot.”

It is likely that the economy will move into a decade of very poor growth, as the advanced economies will find themselves lucky with a growth of 1% annually, if they are able to achieve that, in the presence of high levels of inflation.

He said, “I think we are experiencing a backlash from the huge stimulus packages that were implemented in 2020 and 2021. That did not deliver the kind of potential growth that many economists expected.”