While the global economy is expected to avert a recession, business conditions will be increasingly difficult in the year ahead as financial markets tighten, S&P Global Market Intelligence said. The risk of recession is high—in the 40-50 per cent range in major economies. Rapidly tightening financial conditions pose a downside risk to global growth, it said.
After a 3.3 per cent contraction in 2020 and a 5.8 per cent rebound in 2021, global real gross domestic product (GDP) growth is projected to slow to 2.7 per cent in 2022 and 2.6 per cent in 2023.
In the absence of new shocks, the global economy is projected to resume growth, albeit at a tepid annual pace of under 2 per cent quarter over quarter (QoQ) in the third and fourth quarters this year.
Mainland China is reopening after lockdowns and Asia Pacific's emerging markets are achieving solid growth even as European and US economies struggle. Worldwide, the transition from pandemic to endemic for COVID-19 is enabling growth in travel, tourism, and other consumer service sectors that were hit hard during the 2020 recession.
In advanced countries, household finances are generally in good shape, thanks to accumulated savings and asset appreciation in 2020-21. In a cycle dominated by consumer spending, households are positioned to drive the global expansion forward.
With the world's population growing about 1 per cent annually, S&P Global Market Intelligence’s outlook implies solid gains in real per capita GDP and thus avoidance of a global recession.
In response to persistently high inflation and an upward drift in long-run inflation expectations, central banks are accelerating monetary policy tightening.
While the 10-year US treasury yield has retreated from mid-June highs to around 3.0%, risk spreads have widened, raising financing costs for businesses and households. More emerging markets appear unable to raise new international bonds at sustainable cost levels, forcing them to seek alternative funding sources.
US real GDP declined at an annual rate of 1.6 per cent QoQ in the first quarter, pulled down by a sharp rise in imports and a decline in exports. S&P Global Market Intelligence expects a similar contraction in the second quarter, owing to a sharp reduction in inventory accumulation.
Mainland China's real GDP declined 2.6 per cent QoQ in the second quarter, resulting in 0.4 per cent year-on-year in growth that was supported by infrastructure spending and investment by state-owned firms.
Real GDP growth in mainland China is projected to slow from 8.1 per cent in 2021 to 4 per cent in 2022 before strengthening to 5.2 per cent in 2023.
Asia Pacific will dominate global growth as other regions falter. Resilient growth in the region is key to S&P Global Market Intelligence’s outlook of sustained global economic growth in 2022 and 2023.
This region will likely account for 53 per cent of global real GDP growth in 2022 and an exceptional 62 per cent in 2023.
After slowing from 6.2 per cent in 2021 to 3.9 per cent in 2022, Asia Pacific's real GDP growth is projected to settle at 4.4 per cent in both 2023 and 2024.
India, Indonesia, Vietnam and the Philippines will likely achieve growth rates of 5-7 per cent.