World Economy Headed for Recession in 2023, India will Become Third $10 Trillion Economy in 2035

GG News Bureau

New Delhi, 26th Dec. According to the Centre for Economics and Business Research, the world will enter a recession in 2023 as higher borrowing costs to combat inflation cause a number of economies to contract.

The global economy surpassed $100 trillion for the first time in 2022, but will stall in 2023 as policymakers fight rising prices, according to the British consultancy’s annual World Economic League Table.

“It’s likely that the world economy will face recession next year as a result of the rises in interest rates in response to higher inflation,” said Kay Daniel Neufeld, director and head of Forecasting at CEBR.

The report added that, “The battle against inflation is not won yet. We expect central bankers to stick to their guns in 2023 despite the economic costs. The cost of bringing inflation down to more comfortable levels is a poorer growth outlook for a number of years to come.”

The findings are more pessimistic than the latest International Monetary Fund forecast. This institution warned in October that more than a third of the world economy will contract and that there is a 25% chance that global GDP will grow by less than 2% in 2023, defining a global recession.

Nonetheless, by 2037, global GDP will have doubled as developing economies catch up with richer ones. The East Asian and Pacific region will account for more than a third of global output by 2037, while Europe’s share will be less than a fifth.

The CEBR derives its base data from the IMF’s World Economic Outlook and forecasts growth, inflation, and exchange rates using an internal model.

China is now expected to overtake the United States as the world’s largest economy in 2036, six years later than previously predicted. This reflects China’s zero-covid policy and rising trade tensions with the West, both of which have slowed its growth.

CEBR had anticipated the switch in 2028, but it was pushed back to 2030 in last year’s league table. It now believes the tipping point will occur in 2036, or even later if Beijing attempts to seize control of Taiwan and faces retaliatory trade sanctions.

“The consequences of economic warfare between China and the West would be several times more severe than what we have seen following Russia’s attack on Ukraine. There would almost certainly be quite a sharp world recession and a resurgence of inflation,” CEBR said.

“But the damage to China would be many times greater and this could well torpedo any attempt to lead the world economy.”

It also predicted that, “India will become the third $10 trillion economy in 2035 and the world’s third largest by 2032.”

Over the next 15 years, the UK will remain the world’s sixth largest economy, with France ranking seventh, but Britain is no longer expected to grow faster than European peers due to “a lack of growth-oriented policies and a clear vision of its role outside of the European Union.”

Emerging economies with natural resources will benefit “significantly” as fossil fuels play an important role in the transition to renewable energy.

The global economy is still a long way from the $80,000 per capita GDP level at which carbon emissions decouple from growth, implying that additional policy interventions are required to meet the target of limiting global warming to 1.5 degrees above pre-industrial levels.