US and Global Economy to Grow Slower in 2023, Possibility of Recession in Some Nations: UN

A flag of the United Nations flies in front of the U.N. headquarters in Geneva, Switzerland, in a file photo. Fabrice Coffrini/AFP

The global economy is predicted to register a slower growth this year, continuing the trend from last year, with the United States poised to mark a smaller pace of growth and several countries likely to see a “mild recession,” according to the United Nations.

Global economic growth in 2023 is projected to be 1.9 percent, slower than the 3 percent growth in 2022 and the 5.8 percent growth in 2021, according to a Jan. 25 U.N. report. Developed economies are estimated to register a growth rate of 0.4 percent this year, down from 2.6 percent last year and 5.2 percent the year before. The expected growth rate of the United States is set at 0.4 percent, down from 1.8 percent in 2022 and 5.7 percent in 2021.

The “least developed countries” are expected to see the highest rate of growth in 2023, at 4.4 percent, up from 4.3 percent in 2022. Developing countries are projected to keep their growth stable at 3.9 percent this year.

“Economies in transition,” which includes Southeastern Europe, the Commonwealth of Independent States (including Russia), and Georgia, are the only regions projected to see a negative growth at minus 0.8 percent.

The U.N. findings come as global economics of much of last year was affected by the Russia–Ukraine war, as well as widespread inflation, a crippling energy crisis, and a tightening of debt.

Recession, Inflation

According to the U.N. report, both developing and developed countries are at risk of recession in 2023. In the United States and the European Union, growth momentum has “significantly weakened.”

More than 85 percent of global central banks were found to have tightened monetary policy and raised interest rates rapidly since late 2021 in an attempt to control inflation and prevent a recession. In 2022, global inflation reached a “multi-decade high” of about 9 percent. The U.N. is predicting inflation to ease this year but still remain elevated at 6.5 percent.

“In most countries, we expect that private consumption and investment will weaken due to inflation and higher interest rates,” said Ingo Pitterle, senior economist at the U.N. Department of Economic and Social Affairs.

“Several countries will see a mild recession before growth is forecast to pick up in the second half of this year and into 2024.”

In the United States, 12-month inflation consistently remained above 6.5 percent for every single month in 2022. In September 2022, Sen. Rand Paul (R-Ky.) blamed the Biden administration’s policies for driving up inflation.

“The inflation came from the free checks that were passed out,” he said. “They shut the economy down. They sent free checks to everyone. And they said, oh, this will make up for it. But guess what? When people add up how much they’re paying for gas and the grocery store, it’s canceled out all the free money.”

US Economy 2022 and 2023

According to the latest data from the Department of Commerce, the country registered an adjusted annual growth rate of 2.9 percent in the fourth quarter. This brought the growth rate for the entirety of 2022 to 2.1 percent, which is less than half of the 5.7 percent growth in 2021.

The first two quarters of 2022 had been negative, registering a 1.6 percent and 0.6 percent decline, respectively. But the last two quarters registered growth, with the third quarter growing by 3.2 percent. As a result, the overall GDP growth figure for 2022 avoided being in the red.

However, experts still worry about the United States slipping into a recession. In December 2022, housing starts, retail sales, and industrial production all declined far more rapidly than expected.

A recent survey of 23 large financial institutions found that more than two-thirds of the firms are expecting the U.S. economy to contract in 2023. The institutions foresee consumer spending to weaken as U.S. citizens burn through their savings while the Federal Reserve keeps borrowing costs elevated.

“The U.S.’s M2 money supply fell for the first time in 60-plus years in 2022, yet the Fed keeps insisting that more tightening is needed. The bond market knows that this not only means lower inflation, but a recession. The yield curve inversion is screaming that the Fed is too tight,” economist Steven Anastasiou wrote in a tweet on Jan. 26.

M2 money supply refers to the Fed’s estimate of the total money supply, which includes all the cash that people have on hand as well as the money deposited in savings accounts, checking accounts, and other short-term savings instruments.