Leading economic forecast predicts global recession for 2023, rates Azerbaijan's 2022 performance

The world will be facing an economic recession in 2023 as higher borrowing costs aimed at tackling inflation are expected to cause a number of economies to contract.

This forecast was provided by the Centre for Economics and Business Research, a renowned and the leading British economics consultancy in their annual report titled the "World Economic League Table" (WELT). It provides an economic forecast for each of the included 191 countries. 

According to the WELT 2023, the global economy surpassed $100 trillion for the first time in 2022, but will stall in 2023 as policymakers continue their fight against soaring prices.

“It’s likely that the world economy will face a recession next year as a result of the rises in interest rates in response to higher inflation”, said Kay Daniel Neufeld, director and head of Forecasting at CEBR.

The report states, that “The battle against inflation is not won yet. We expect central bankers to stick to their guns in 2023 despite the economic costs. The cost of bringing inflation down to more comfortable levels is a poorer growth outlook for a number of years to come”.

The findings are more pessimistic than the latest forecast issued by the International Monetary Fund, which warned in October that more than a third of the world economy will contract and there is a 25% chance of global GDP growing by less than 2% in 2023, which it defines as a global recession.

Azerbaijan is also one of the 191 countries for which an economic forecast was conducted, with the report stating, that "Classified as an upper-middle-income country, Azerbaijan had an estimated PPP adjusted GDP per capita of $17,448 in 2022. Following a GDP contraction of 4.2% in 2020, the economy grew by 5.6% in 2021 and an estimated 3.7% in 2022, bringing output 4.9% above 2019 levels. [...] In 2022, the unemployment rate is expected to have fallen by 0.1 percentage points to 5.9%. The public finances are in a healthy state, with government debt as a share of GDP expected to have fallen to 20.7% in 2022 from 26.4% in 2021. The government is expected to have operated a fiscal surplus of 17.1% of GDP in 2022, despite the global turbulence in public finances induced by the pandemic and rising inflation. The combination of a relatively low debt burden and a fiscal surplus mean that the public finances are in a strong position, which will support private sector confidence and investment, whilst also providing the government with greater fiscal ammunition in the future".

The Azerbaijani private sector is recorded to have been improved "by a regulatory and institutional environment that is increasingly conducive to business activity. In 2020, the country ranked 34th in the World Bank's Ease of Doing Business Index, compared to 69th in 2016".

Furthermore, the WELT 2023 predicts that Azerbaijan's annual rate of GDP growth is set to slow to an average of 2.5% over the next 5 years. Between 2028 and 2037, Cebr forecasts that the rate of GDP growth will also average at 2.5% per year

By 2037, the world's gross domestic product will have doubled as developing economies catch up with the richer ones. The shifting balance of power will see the East Asia and Pacific region account for over a third of global output by 2037, while Europe’s share shrinks to less than a fifth.

China is now not set to overtake the US, as the report states, as the world’s largest economy until 2036 at the earliest — six years later than expected. That reflects China’s zero Covid policy and rising trade tensions with the west slow, which have slowed its expansion.

Other key takeaways from the report: 

• India will become the third $10 trillion economy in 2035 and the world’s third-largest by 2032.
• The UK will remain the world’s sixth largest economy, and France seventh, over the next 15 years but Britain is no longer set to grow faster than
• European peers due to “an absence of growth-oriented policies and the lack of a clear vision of its role outside of the European Union”.
• Emerging economies with natural resources will get a “substantial boost” as fossil fuels play an important part in the switch to renewable energy.
• The global economy is a long way from the $80,000 per capita GDP level at which carbon emissions decouple from growth, which means further policy interventions are needed to hit the target of limiting global warming to just 1.5 degrees above pre-industrial levels.