Economists disagree on global recovery; supply chain reforms will help India: WEF survey 2023

India is among the economies most likely to benefit from supply-chain changes, according to a survey released on Tuesday. Economists worldwide are evenly divided on the outlook for the economy, with equal shares of 45 per cent finding a global recession this year probable or unlikely. In its most recent Chief Economists Outlook, the World Economic Forum reported that economists anticipate regional differences in growth and inflation dynamics.

On the front of economic policy, 72% anticipate that proactive industrial policy will become more prevalent over the next three years.

Recent disruptions in the financial sector are not viewed by the majority as an indication of systemic vulnerability; however, additional bank failures and volatility are anticipated this year.

Asia is anticipated to display the most ebullient regional dynamics, with China’s reopening driving a significant rebound for the country and boosting activity across the continent.

90% of leading economists predicted moderate growth for East Asia and the Pacific and South Asia.

In contrast, three-quarters of chief economists continue to anticipate weak or very poor growth in Europe. In the United States, respondents were more optimistic in March-April than they were in January, but they remain divided on the outlook, with US growth prospects clouded by elevated uncertainty regarding financial stability and the probable pace and scope of monetary tightening.

South Asia, East Asia and the Pacific, Latin America and the Caribbean, and the United States are the regions most likely to benefit from supply-chain adjustments, according to a March-April 2023 survey of the WEF’s Community of Chief Economists.

When asked to name specific economies that are likely to benefit, Vietnam, India, Thailand, Indonesia, Mexico, Turkey, and Poland were frequently mentioned.

On a sector-by-sector basis, the chief economists listed a variety of industries where they anticipate the most significant supply chain changes, including semiconductors, renewable energy, automotive, pharmaceuticals, food, energy, and the broad technology category.

In addition, the chief economists identified a number of business strategies that will impact the evolving structure of global supply chains. Ninety-four percent of respondents anticipated that businesses would reconfigure their supply chains in accordance with geopolitical faultlines.

The proportion of respondents expecting high inflation in 2023 increased significantly across all regions, and 76% of chief economists anticipate that the cost of living will remain high in many countries.

Chief economists believe global markets are systemically sound despite recent bank failures and market volatility.

However, two-thirds of respondents cited the likelihood of additional bank failures and disruptions, and more than eighty percent anticipate that businesses will find it more difficult to obtain bank loans due to tighter lending criteria.

According to Saadia Zahidi, Managing Director of the World Economic Forum, the most recent edition of the Outlook highlights the unpredictability of the present state of the economy.

“For the time being, labor markets are proving resilient, but growth remains tepid, global tensions are intensifying, and the cost of living in many countries remains high. “These results demonstrate the urgent need for both short-term global policy coordination and longer-term cooperation around a new growth framework that will integrate inclusion, sustainability, and resilience into economic policy,” she added.

The survey was released in advance of the WEF’s Growth Summit, which will be held in Geneva on May 1-2 and is expected to address the global growth outlook, economic hotspots, competition and cooperation issues, as well as employment, skills, and equity.

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