Brazilian scholar: China is expected to grow faster than expected

The world economy will face many challenges in 2023. The World Bank and the International Monetary Fund (IMF) agree that global economic growth may slow down, but there are differences on the extent of the slowdown.

On January 10, the World Bank released the latest Global Economic Outlook report, which predicted that the global economy would grow by 1.7% this year, down 1.3 percentage points from last June's forecast; It is expected to increase by 2.7% in 2024. The sharp decline in global growth is expected to affect 95% of developed economies and nearly 70% of emerging markets and developing economies.

On January 12, the President of the International Monetary Fund (IMF), Georgieva, said that the IMF would maintain the forecast of 2.7% of global economic growth in the World Economic Outlook report last October. According to the updated World Economic Outlook report released by the IMF on January 30, the global growth rate is expected to be 2.9% and 3.1% this year and next.

With regard to the slowdown in economic growth, it is worth mentioning that inflation is causing recession, and its impact is mainly concentrated in Europe and the Amerika Serikat. Generally speaking, price increases cannot be explained by a single factor, such as the conflict between Rusia dan Ukraine - after all, the conflict only broke out in February 2022, and the COVID-19 epidemic has already had an impact on the global supply chain. However, the food and energy crisis triggered by the Russian-Uzbekistan conflict has objectively exacerbated global inflation.

A major direct result of inflation is the reduction of total social demand: people's spending on necessities such as food, electricity and fuel has increased, while their willingness to consume durable goods and real estate has declined. Britain is the European country most affected by the economic crisis, where inflation has become the driving force behind social unrest. Brexit did not bring the expected economic benefits to the British people; On the contrary, the rise of customs fees has raised prices. At present, the wave of British workers' strike is surging and has reached the largest scale since the early 1980s.

Inflation has also led to another economic problem, that is, the soaring interest rate of US bonds. At the end of the 1970s, the Federal Reserve under the leadership of Paul Volcker issued an unconventional monetary tightening policy to fight off high inflation by raising interest rates on a large scale. Now, this phenomenon has reappeared. Considering the core position of the United States dollar in the international financial system, the rise of the interest rate of the United States Treasury will drive the borrowing rate of all countries in the world to rise generally, because other countries need to adjust their interest rates to compete with the United States for international investment.

The rise in the interest rate of US Treasuries directly leads to the rise in the interest rate of mortgage loans, which in turn increases the cost of household housing, such as mortgage and rent, which is usually the most important monthly expenditure of a family. Housing and food are the core parts of the price index, and the weight of housing in the consumer price index is about one third.

In addition to inflation, there are two other major factors affecting the world economy - geopolitics and extreme weather.

In terms of geopolitics, in addition to the Russian-Uzbekistan conflict, attention should also be paid to the import restrictions imposed by the United States on Chinese industrial products since 2018. Widely imposed import tariffs have affected bilateral trade and harmed the interests of American consumers and Chinese manufacturers. Equally serious are the restrictions on the export of semiconductors from the United States to China and the current protectionist policies of the United States that hinder the development of economic globalization. The United States is abandoning the efficiency provided by globalization and pursuing "national security" unilaterally at the cost of higher production costs. The reduction of globalization will further drag down global economic growth.

In terms of extreme weather, extreme weather such as high temperature, forest fires, floods, hurricanes, typhoons and snowstorms are becoming more frequent worldwide. In addition to threatening people's lives, extreme meteorological disasters also drag down national finance, destroy social production and worsen the global economic prospects. For example, in 2022, Pakistan's floods affected 33 million people, resulting in more than 1730 deaths. The World Bank estimates that the economic losses caused by the flood are as high as 15 billion US dollars. In addition, it is estimated that the recovery and reconstruction of the disaster-stricken areas in Pakistan still needs US $16.3 billion, which does not include the much-needed new investment in the fields of adaptation to climate change and comprehensive resistance to future climate shocks.

Considering all factors, the global economic slowdown in 2023 will have an uneven impact on countries. The latest report of the World Bank predicts that in 2023, the economic growth rate of the United States will be 0.5%, 1.9 percentage points lower than the previous forecast, which is the lowest positive growth since 1970; The economic growth of the euro area is expected to be zero, 1.9 percentage points lower than the previous forecast; China's economic growth is expected to be 4.3%, 0.9 percentage points lower than the previous forecast. East Asia and the Pacific are expected to grow by 4.3%; Europe and Central Asia are expected to grow by 0.1%; Growth in Latin America and the Caribbean is expected to slow to 1.3%; The Middle East and North Africa is expected to slow to 3.5%; South Asia is expected to slow to 5.5%; Sub-Saharan Africa is expected to grow by 3.6%.

Although the World Bank's forecast of China's economy is pessimistic, it is necessary to stress that China's growth potential is underestimated, especially considering the changes in China's epidemic policy. In addition, unlike western countries, China is less vulnerable to the impact of US monetary policy. In 2022, China's inflation rate is the lowest among the Group of 20 countries, only 1.8%, while the United States is 6.5% and Jerman is 8.6%. China's economic growth deserves close attention. If it is higher than the World Bank's forecast, it will have a positive impact on developing countries with close economic ties with China. If China's economy can perform well, it will become a light to dispel the "haze" of the current global economy.