Global slowdown of the world economy

Global economy and trade

The IMF has published its June update of the world macro forecast. The global economy growth rate is expected to reach 3% this year, down from 3.5% in 2022 (the estimate for this year has improved by 0.2 percent points compared to the April report, while the estimate for 2024 remains the same at 3%).

The developed countries will experience a slowdown in the GDP growth rate up to 1.5% (compared to 2.7% in 2022) amid the decline in industry and exhaustion of the growth effect in the services sector. In the USA, the GDP growth is expected to slow down to 1.8% this year (compared to 2.1% in 2022); in the Eurozone, it is expected to slow down to 0.9% (compared to 3.5% in 2022), with a forecast of plus 1.5% for 2024. In Germany, the GDP is expected to decline by 0.3% this year.

The developing countries are affected by the “geo-economical fragmentation” and weakening external demand. The growth rate in 2023 will remain at the last year’s level (4%), while China’s growth should increase up to 5.2%. The IMF has raised its forecast for Russia’s GDP growth by 0.8 percent points to 1.5%, while the forecast for 2024 remains unchanged – an increase by 1.3%.

The global trade growth will slow down from 5.2% in 2022 to 2%, before rising to 3.7% in 2024.

Business optimism of the Eurozone

The business activity in the Eurozone is continuing to decline faster than it had been expected by experts. According to the preliminary estimates of S&P Global, the composite PMI (leading indicator of the GDP dynamics) in July has dropped to the lowest level in eight months, amounting to 48.9 points after 49.9 points in June. (It should be noted that the value above 50 points indicates an increase in activity, while a lower value indicates its decline).

While remaining in the positive range, in July the service sector index has reached its lowest level since January this year – 51.1 points (52 points a month earlier). The industry sector index has decreased to the three-year minimum, amounting to 42.7 points (43.4 points a month earlier). The decline is explained by the weakening of demand and reduction of export orders.

According to the preliminary estimates, the most severe decline in business activity in July has been observed in the largest economies of the Eurozone, Germany and France.

The composite PMI in Germany has dropped to 48.3 points from 50.6 points in June. The service sector index has dropped to 52 points from 54.1 points in June, while the industry sector index has dropped to 38 points from 40.6 points in June amid the decline in orders.

In France, the general business activity index has dropped to 46.6 points compared to the June’s value of 47.2 points. The service sector PMI has dropped to 47.4 points from 48 points a month earlier, and the industry sector PMI has reached 44.5 points compared to 46 points in June.

The Oxford Economics experts indicate the increased risks of the GDP decline in the Eurozone in the third quarter.