Global growth weakened by the tightening of monetary policies

At the port of Ningbo-Zhoushan (Zhejiang), China, Tuesday, June 6. STR / AFP

The horizon for the world economy remains very uncertain, judging by the discordant forecasts which have just been published a few hours apart by the Organization for Economic Co-operation and Development (OECD, Wednesday 7 June) and the World Bank (Tuesday 6 June). For the first institution, based in Paris, “the evolution of the world economy has started to improve, but the recovery remains fragile”, while the second is worried about growth which “has slowed down significantly” by compared to 2022 and warns of a “risk of rising financial stress in emerging market and developing economies”.

The rise in global gross domestic product (GDP) should slow to 2.1% in 2023, according to the Washington institution, while it should not be below 2.7% for the OECD. Whatever the hypothesis adopted, the scenario is the same: that of a year 2023 at the bottom of the wave, where growth should be lower than its level of 2022, before picking up again, in 2024, at a rate between 2.4% and 2.9%.

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A general picture that hides, however, major geographical disparities. Asia, and in particular India and China, remains the main engine of global growth, since it contributes two-thirds. Fragile performance. In a note published at the end of May, the International Monetary Fund warns of an “increased risk of default” for companies in the region, due to their high indebtedness, “while monetary policy and financial conditions remain tense”. A sign of this uncertainty: the Chinese authorities indicated on Wednesday that exports from China fell back into the red in May. A first since February.

Forte inflation

Elsewhere, the World Bank is concerned about the fate of countries in Latin America, South Asia and sub-Saharan Africa, which are suffering from falling international demand, rising prices and the drying up of foreign investment. Finally, the gap is widening between developed countries, which have resisted the crisis linked to the Covid-19 pandemic better than others, thanks to their support programs, and low-income countries. For a third of them, GDP per capita should remain, in 2024, still below the level of 2019, just before the pandemic. Growth in emerging countries – excluding China – should not exceed 2.9% in 2023, according to the World Bank, compared to 4.1% in 2022.

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International growth will largely depend on the orientation of monetary policies, and therefore on the level of inflation. Will the central banks continue to raise their rates to slow the rise in prices, even if it means further stifling economic activity? Even though energy prices have come down from the highs reached at the start of the war in Ukraine, and despite recent interest rate hikes which have not been so significant in such a short time for the past four decades , the OECD notes “that over the past eighteen months, core inflation has turned out to be higher than expected” and “could be more persistent than expected”.

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