The Blubber

Per Bloomberg

COVID-19's restrictions on travel and its complications resulted in the global economy coming to a pause. Though the world is slowly opening up, another global event could cause the world economy to reach its record three-decade low.

Bloomberg Economy shares how the world economy could be heading to its three-decade low as the war in Ukraine continues. The Ukraine war has resulted in the prices of energy soaring, affecting the global economy.

Economist Scott Johnson shares a new analysis of growth forecasts in 2023. Per the analysis, Johnson expects the global economy to grow by just 2.4%, a slowdown compared to the 3.2% this year.

The other times there has been a slowdown in growth this significant since 1993 is during the crisis years of 2009 and 2020.

The slowdown of the global economy averages out the different situations of different countries. While some countries are experiencing a drop in the value of their currency, others are experiencing an increase in the value of their currency.

An example of a problematic currency is the euro, which is starting 2023 in recession. Against the US dollar, the euro has dropped by 6.19% year-over-year as of press time and reaching its 20-year low, per CBS News.

The last time the euro dropped this low was in October 2020, when it fell to $0.83 against the dollar as COVID-19 bashed the global economy. Jonathan Petersen, Capital Economics senior markets economist, expected the euro to fall to $0.90 by mid-2023 before it starts to rebound. However, as of press time, the euro has already improved to $1.06 against the US dollar.

China, on the other hand, is expected to expand by 5% due to its zero-tolerance Covid strategy and other plans. However, in the US, growth estimations remain unknown as analysts think that the Fed is trying to move towards a 5% terminal rate.

Johnson: “In the US, with wage gains set to keep inflation above target, we think the Fed is headed toward a terminal rate of 5%, and will stay there till 1Q2024."

Resources:

Bloomberg

Reuters

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