How did Global Economies perform in 2023?

Written by Austin Jose

Edited by Luke Heritage

February 5th, 2024

In 2023, despite pessimistic forecasts, the global economy defied expectations. Still emerging from the grip of a pandemic, interest rates rising, new conflicts unfolding and simultaneous climate disasters, analysts predicted a bleak year ahead. But against all odds, a global recession¹ was averted, with the economy surging by about 3%. Global job markets have remained resilient, and inflation is slowly descending from the record highs of 2022. Nevertheless, outcomes have differed across nations, with many experiencing mixed results, and others struggling profoundly, as predicted. To gauge the performance of these economies, delving into economic statistics is essential. These metrics provide valuable insights into their overall performance, enabling us to make informed assessments and reach conclusive judgments.

Economic Growth

Economic Growth, pertaining to the increase in real Gross Domestic Product (GDP)² over time, as stated before, has been a formidable challenge in recent times, amidst a plethora of global crises. The pandemic, the Great Recession and the war between Russia and Ukraine have all played a pivotal role in limiting economic expansion worldwide. But amidst these challenges, certain nations have economically flourished. One example of this is Macau, an autonomous province of China, driven by a robust influx of gambling revenues, vibrant commerce and entertainment offerings from the city, contributing to a huge 74.4% growth rate. Macau was followed by Guyana, emerging as another success story, boasting a precited substantial growth rate of 38.4% in 2023 by IMF. This was assisted to the discovery of extensive oil deposits, found by ExxonMobil, which has injected newfound promise into the country's economy. This fortune has transformed Guyana from one of South America's poorest nations into a significant economic player of the continent.

In the realm of major economies, growth rates in 2023 generally fell short compared to recent years, primarily with the larger economies more susceptible to the supply shocks of the global conflicts with the disruption of supply chains. For example, the UK saw a -0.1% estimated growth rate in 2023 q3, a downturn compared to the previous years, and fell into recession in q4, with a growth rate of -0.3%. In addition, Germany faced a similarly dire situation, with a contraction of 0.3% in 2023 q4, displaying the bleak prospects of the German economy. Additionally, other G7 countries saw minimal rises in growth. Examples include the US economy, expanding by 2.5% and Japan’s by slightly above 1%. But conversely, another large economy, China saw substantial economic gains of 5.2% respectively. This was largely incited from high domestic demand, shown by its large population, coupled with the moderate inflation rate experienced, resulting from resilience towards the price shocks experienced across the world.

Inflation

Inflation, the phenomenon of sustained rises in the general price level over time, was certainly a significant economic factor of 2023. This can be attributed to the recovery of the pandemic, with recent conflicts also raising prices up. For most countries, price hikes stemmed from the surge in commodity³ prices, due to limited international supply worldwide. This was a consequence of the international sanctions on Russian exports as a result of the Russian invasion into Ukraine. With much international dependence relying on Russian oil and gas, countries were left scrambling to find alternate energy sources across the globe, with them usually being more expensive than cheap Russian gas. The UK experienced the brunt of this turmoil, experiencing the highest rate of inflation of advanced economies in 2023, 10.4% in February 2023. Furthermore, the UK also experienced other issues, such as a high levels of job vacancies, which prompted to cost-push inflation as the economy struggled to maintain output levels. Also, with the substantial food imports as a result of its limited production capacity, and large population, it only makes the UK more vulnerable to the supply chain shocks⁴ which has occurred globally.

In contrast, inflation has not become a major issue in certain economies. China presents a unique case, with inflation hovering around a 0% figure, and at times dipping below it. This can be owed to China's efficient exporting sector, which have supported the mitigation of global inflationary pressures. Yet China have formulated a new challenge within their economy: deflation⁵. Despite its huge population, aggregate demand has not surged as expected, intensified by a record number of unemployed youths. These dilemmas have been caused and amplified due to weak net trade data due to the pandemic, and are likely to worsen under deflation.

Unemployment

Unemployment, known as the quantity of people who are willing and able to work, but cannot find employment has emerged as a contentious concern for governments worldwide in the last year. The current economic fragility around the world has served to exacerbate unemployment rates to alarming record highs. This was especially true in South Africa, where the unemployment rate has reached a staggering 31.6% in 2023 q3. These shocking unemployment rates have been hindered by insufficient job creation, and an institutional flaw of education, where too many people are leaving education with inadequate skills. This high unemployment rate has severely undermined South Africa's economic potential, with GDP only rising minimally yearly, which creates a dreary outlook for future job creation, further highlighting the plight of such high unemployment.

Similarly, China have had startling unemployment figures. Though its unemployment has been at 5.3%, youth unemployment for 16-24 years old have rise to more than 20% which led to the government in the last year to stop publishing data which illustrates the deep concerns in the Chinese economy with the level of exports sold abroad falling significantly and the economy slipping into deflation where prices are falling. This could resemble the fact that jobs creation may be challenging with business confidence affected by falling profits and economic growth making investment risky which also is not helped by China’s current unsupportive interest rates.

For the major advanced economies, the unemployment rate has been substantially lower. The United States saw an unemployment rate of 3.5% at the end of 2023 with jobs still being created despite high interest rates affecting the level of investment American firms could provide towards job creation. This may be reasoned by the strong economic growth the US economy is currently undergoing. The UK saw a slightly worse unemployment rate of 4.2% which covers a large amount of people on long-term sick: something which the UK government is seeking to intervene through encouraging many to return to work through tax reforms and cutting waiting lists.

National Debt

Reducing the total amount of outstanding borrowing by a government, otherwise known as reducing national debt, has been a core aim for many countries in the last year especially due to the high levels of borrowing following the Covid-19 pandemic where governments spent significant sums of money into healthcare to help mitigate the spread of the virus. This has obviously led to debt rising with countries facing the debt levels rise to levels not seen previously. The United States has the highest level of debt with its level at $31.4 trillion in 2023 which has gone up due to higher government borrowing costs mostly due to the high interest rates. Though still a considerable sum, many other countries also face high debt levels which have not shrunk at all during the year such as China, whose debt level stands at $14 trillion followed by Japan ($10.2 trillion), France ($3.1 trillion) and Italy ($2.9 trillion). Countries like the United States have implemented a debt ceiling where borrowing cannot exceed a certain amount though this has been raised up recently in 2023 to avoid a default occurring which would likely cause a major recession.

Other countries like Japan have seen their debt levels outpace their GDP due to their high welfare costs and low productivity due to an ageing population. However notably, its debt has decreased from $11.87 trillion a decade ago which makes it the one of the advanced economies to see its debt levels fall in 2023. This was also the case in the UK where national debt saw a minimal, albeit notable reduction in 2023 due to higher taxes imposed on its working population to help pay off significant sums of borrowed funds from the COVID-19 pandemic.

Conclusion

It is understood that many countries performed well or better than expected in 2023, especially in certain statistics. However, one country had performed well across all statistics, also being a relatively large economic power in Europe: Greece. Although Greece has not shown tremendous figures in economic growth (1.2%), inflation (7.6%-3.7%, from the start and end of 2023), unemployment (12.2%-9.2%, from the start and end of 2023), it has shown consistency and improvement across the spectrum. But impressively, between 2023 and 2030 it is predicted that Greece will also register a world record reduction in the debt ratio, by 26 percentage points, which argues that Greece could continue to succeed in the coming years. Therefore, when judging economies by overall performance, Greece is clearly the most successful, across all categories.

Footnotes

Recession: A sustained period of negative growth in GDP for two or more consecutive quarters.
Gross Domestic Product (GDP): The market value of all goods and services produced in an economy, in a given time period.
Commodity: A raw material that holds value e.g. Gold, Silver, Platinum etc.
Supply Chain Shocks: a sudden or unexpected event that dramatically restricts the supply of a raw material or product, leading to a change in price.
Deflation: A decline in the general price level over time, for goods and services.