Global economic growth slowed to 2.4 percent over the next year on interest rate hikes, Geopolitical Risks: KIEP

SEJONG, Nov. 10 (Yonhap) — The global economy is expected to grow 2.4 percent slower-than-expected next year, a state-run economic think tank said on Thursday, citing the fallout from aggressive monetary tightening in major economies and ongoing geopolitical risks.

According to the Korea Institute for International Economic Policy (KIEP), growth prospects have fallen from a 3.6 percent expansion forecast in May.

For the year, the global economy is expected to grow 3.1 percent, also slower than the previously estimated 3.5 percent expansion, the institute said.

Growth prospects for 2023 are higher than the 2.2 percent estimated by the Organization for Economic Co-operation and Development but lower than the 2.7 percent proposed by the International Monetary Fund.

KIEP said the estimate is based on the assumption that the United States and other major economies will maintain monetary tightening policies for at least the first half of next year.

“The global economy is on thin ice and incidents can happen any day,” KIEP President Kim Heung-chong told reporters.

“In the last three years (fiscal conditions of countries around the world) have become fragile after three years of pandemic and the war between Russia and Ukraine. And these factors have nothing to do with South Korea’s economy,” Kim added.

By country, KIEP says annual US economic growth is projected to be just 0.6 percent in 2023 as private consumption is likely to contract due to inflation and higher borrowing costs.

The eurozone economy is expected to stagnate in 2023, while the UK economy is expected to contract by 0.2 percent following the Russian invasion of Ukraine.

Meanwhile, China will see annual growth of 4.8 percent due to the eased COVID-19 curbs, although its discord with the US will also remain a potential risk, KIEP said.

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