Global economic revitalization: strong momentum despite obstacles

In 2023, the global economy continues to slowly recover from negative factors such as the COVID-19 pandemic and the Ukraine crisis, showing resilience but with slow and uneven growth. The International Monetary Fund (IMF) October released the "World Economic Outlook" report, predicting that the global economic growth rate will slow down from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024. In the 20 years from 2000 to 2019, the average global economic growth rate was 3.8%. The 2023 economic growth rate may reach the lowest level in more than 20 years, excluding the periods of the global financial crisis and the COVID-19 pandemic.

In the post-pandemic era, the economic development of countries around the world shows an increasingly obvious trend of differentiation. Not only is there a differentiation between developed and developing economies, but there are also differentiation characteristics within both. The IMF predicts that the growth rate of developed economies will decrease from 2.6% in 2022 to 1.5% in 2023. The expected economic growth rate in the United States for 2023 has been raised to 2.1%. Economic growth in the Eurozone is weaker than expected and has been revised down to 0.7%, nearing the edge of recession. The situation is even worse in the UK, with an expected economic growth rate of only 0.5%. The expected economic growth rate in Japan has been raised to 2%.

For emerging markets and developing economies, the IMF predicts a slight overall slowdown in growth, from 4.1% in 2022 to 4.0% in 2023. Some African countries are facing debt crises and financial market turmoil due to the impact of the high U.S. dollar interest rates. Southern Africa is expected to have a GDP growth rate of only 0.8% in 2023, and the Middle East is expected to be at 2%. Among Latin American countries, Brazil and Mexico, among others, have achieved growth rates of over 3%, and the expected Latin American growth rate for 2023 is 2.3%. In Asia, East Asia remains the strongest region for global economic growth, with China and India's economic situations better than initially expected, while ASEAN's performance is slightly worse but still maintains a growth rate above 4.2%.

The causes of global economic turmoil and subsequent weakened recovery are mainly as follows:

Firstly, the persistent negative impact of the COVID-19 pandemic on the global industrial chain and supply chain has occurred. During the pandemic, international logistics were hindered, trade and investment development stagnated, and the global industrial chain and supply chain were temporarily disrupted. Although all countries have tried their best to repair, under the influence of various political and economic factors, international logistics and supply chains have been unable to return to the level before the pandemic. Therefore, the world economy has lost the industrial foundation and material guarantee for healthy development.

Secondly, countries around the world are facing an unprecedented energy crisis. The prices of most raw materials used in energy production globally are very high. Under the influence of the Russia-Ukraine conflict, the prices of raw materials have skyrocketed, which has greatly increased energy prices, pushed up the production costs of various products, and brought about serious inflationary pressure. The violent fluctuation of energy prices will also increase the uncertainty of enterprise operations, thereby reducing the willingness of enterprises to invest, forming an obstacle to corporate investment.

Thirdly, global inflation is seriously hindering the pace of the world economic recovery. The surge in energy prices caused by the energy crisis has triggered inflation. The rise in various costs will lead to a decrease in corporate profits and insufficient investment. Especially for multinational companies, inflation will quietly change their global layout, and traditional profit models will be difficult to sustain. Inflation will also cause the disruption of the supply chain and the insufficient production capacity of enterprises, thereby shaking the development foundation of enterprises, leading to a decline in corporate production capacity, and suppressing global output growth.

Fourthly, countries have raised interest rates to curb inflation, leading to a tight liquidity situation and directly suppressing economic growth. As of the end of 2023, the world's major economies still maintain interest rates at a relatively high level. The benchmark interest rate in the United States is between 5.25% and 5.5%, the Eurozone is 4.5%, and the UK is 5.25%. Some developing countries have even higher interest rates, with South Africa's benchmark interest rate at 8.25%, Brazil at 11.75%, and Russia as high as 15%. High-interest rates will inevitably restrict credit, suppress investment and consumption, and thus hinder economic growth while controlling inflation.

Fifthly, geopolitical conflicts have led to fluctuations in global financial markets and a contraction of global trade. After the outbreak of the Russia-Ukraine conflict, the United States and other Western countries imposed financial sanctions on Russia, causing a significant turmoil in the Russian financial market, and Western capital withdrew one after another. At the same time, international financial markets fluctuated violently, and prices of bulk commodities soared. This year, the Israel-Palestine conflict has erupted again, further intensifying the fragmentation of global financial markets and international investment. In addition, the United States and Europe have pushed for "de-risking" against China, causing a contraction in global trade. The World Trade Organization predicts that the growth rate of global merchandise trade in 2023 will be only 0.8%, far below the levels of 2021 and 2022.

Supporting the Global Economic Recovery: The Strength of the Asia-Pacific Region

This year, in order to curb persistently high inflation, the United States has raised its federal interest rates several times, continuously strengthening the expectation of a "soft landing." In terms of results, the Consumer Price Index for November has dropped to 3.1%, and the quarter-on-quarter growth rate of the real GDP of the United States in the third quarter reached an annualized rate of 4.9%, the highest since 2022, achieving five consecutive quarters of positive growth. Among them, private consumption and private investment contributed 2.7% and 1.5% to the growth, respectively, both reaching their highest levels since 2022. Also, due to the resolution of the U.S. debt ceiling issue and the actions taken by the Swiss and U.S. governments to curb financial turmoil, the financial risks faced by the world economy are gradually easing compared to the first half of this year.

For a long time, the internal division of labor in the Asia-Pacific region has been very close, making it the most active region in the global economy. In 2023, the Asia-Pacific region releases the driving force leading the global economic recovery. The IMF report shows that despite encountering some unfavorable factors, the Asia-Pacific region is still a key driving force for global economic development in 2023. The annual economic growth rate is expected to increase from 3.9% in 2022 to 4.6%. This is because open and inclusive development is the main theme of Asia-Pacific cooperation. In June of this year, the "Regional Comprehensive Economic Partnership Agreement" came into full effect for 15 signatory countries. More than 90% of goods trade in the region will gradually achieve zero tariffs, further promoting the liberal