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Economists divided on global recovery; India to benefit from supply chain changes: WEF survey

Economists around the world are evenly split on the outlook for the economy, with even 45 percent considering a global recession likely or unlikely this year, but India is among the economies most likely to benefit from the changes. in the supply chain, a survey showed on Tuesday. .

In its latest Lead Economists Perspective, the World Economic Forum said economists expect growth and inflation dynamics to vary widely across regions.

On the economic policy front, 72 percent predict that proactive industrial policy will become more and more widespread in the next three years.

Although most do not see the recent disruption in the financial sector as a sign of systemic vulnerability, more bank failures and turmoil are seen as likely this year.

Showing divergent regional dynamics, the most buoyant activity is expected in Asia, with China’s reopening expected to fuel a significant rebound for the country and bolster activity across the continent.

More than 90 percent of leading economists expected at least moderate growth in both East Asia-Pacific and South Asia.

At the other end of the spectrum, three quarters of leading economists still expect weak or very weak growth in Europe. In the US, respondents were more optimistic in March-April than in January, but are still divided on the outlook, as US growth prospects are clouded by increased uncertainty about financial stability and the likely pace and extent of monetary tightening.

According to the quarterly survey, conducted between March and April 2023 among the World Economic Forum Community of Chief Economists, the regions most likely to benefit from supply chain changes are South Asia, East Asia and the Pacific, Latin America and the Caribbean, and the US

When asked to name specific economies likely to benefit, those repeatedly mentioned included: Vietnam, India, Thailand, Indonesia, Mexico, Turkey, and Poland.

At the sector level, the chief economists listed a range of industries where they expect supply chain changes to be most pronounced, including semiconductors, green energy, autos, pharmaceuticals, food, energy and the broad technology category.

The chief economists also pointed to a number of business strategies that will influence the changing structure of global supply chains. Geopolitical factors were prominent, with 94% of respondents expecting companies to reconfigure their supply chains based on geopolitical fault lines.

In inflationThere was a marked increase across all regions in the proportion of respondents expecting high inflation in 2023, with 76 percent of chief economists saying they expect the cost of living to remain high in many countries.

Following the recent banking collapses and financial market turbulence, leading economists have expressed confidence in the systemic integrity of global markets.

However, two-thirds highlighted the likelihood of more bankruptcies and bank disruptions, while more than 80 percent said they expect businesses to find it more difficult to obtain bank loans as a result of the stricter lending criteria.

“The latest edition of the Outlook highlights the uncertainty of current economic developments,” said Saadia Zahidi, director general of the World Economic Forum.

“Labor markets are proving resilient for now, but growth remains sluggish, global tensions are deepening and the cost of living remains high in many countries. These results confirm the urgent need for both short-term global policy coordination and long-term cooperation around a new framework for growth that will integrate inclusiveness, sustainability and resilience into economic policy,” he added.

The survey was released ahead of the WEF Growth Summit, which will take place in Geneva on May 2-3, and is expected to discuss global growth prospects, flashpoints in the global economy and competition issues. and cooperation, as well as employment, skills and equity.

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