Kavan Choksi Professional Investor Briefly Talks About the State of the Global Economy
The global economy continues to recover from the effects of covid-19 pandemic, the cost-of-living crisis and Russia’s invasion of Ukraine. As Kavan Choksi Professional Investor points out, in retrospect, the resilience of the global economy has been pretty remarkable. Despite of unprecedented monetary tightening to combat decades-high inflation as well as war-disrupted energy and food markets, economic activity has slowed by not stalled. However, global economic growth is expected to slow over the next decade relative to the prior one. Amid the increased uncertainties in the global marketplace, C-suite executives must try to focus on contingencies, boosting internal operations, improving external communications, and long-term growth.
Kavan Choksi Professional Investor talks about the global economy
As per the economic projections released by the International Monetary Fund (IMF), the global growth is expected to remain at 3% in 2023 and further decline to about 2.9 % in 2024. This marks one of the lowest growth rates for the global economy in decades. Chances of considerable economic recovery on a global scale face a number of challenges. The baseline forecast indicates a slowdown in the global growth from 3.5% in the year of 2022, to 3% in 2023, and 2.9% in 2024, ultimately falling much below the historical average of 3.8 % that was recorded between the years of 2000 and 2019.
It is best not to make dramatic changes to an investment strategy during a recession. If one tries to cash out investments during a stock market correction, they could be locking in their losses. Even if they withdraw money prior to a plunge, they might end up missing the rebound. It is vital to note that some of the best trading days to be in the market, when investments grow the most, happen right after the worst days. Economic growth can decline for two straight quarters during a recession. To prepare for a recession, one has to use strong economic times to their benefit. They need to put emphasis on limiting their spending, forming and sticking to a budget, building an emergency fund as well as eliminating high-interest debts.
Advanced economies across the globe are also expected to experience a decline, dropping from 2.6 % growth in 2022 to 1.5% in 2023 and 1.4% in 2024. The decline can be attributed to several factors, including policy tightening aimed at curbing inflation. As per an IMF report, it is anticipated that global inflation shall gradually decrease, declining from 8.7% in 2022, to 6.9% in 2023 and 5.8% in 2024. Lower international commodity prices and tighter monetary policies are the two key factors that contribute to this decline. As Kavan Choksi Professional Investor points out, core inflation is projected to reduce at a slower pace, and a return to target inflation is not expected until 2025 in most cases. It is vital to focus on monetary frameworks and policy actions for the purpose of anchoring inflation expectations. Maintaining effective communication strategies among diverse stakeholders is also vital to managing inflation expectations.
Owing to growing worries in regard to geo-economic fragmentation, there are concerns about potential disruptions to global trade in commodities. The impact of such disruptions can especially be significant on economic activity, commodity prices, as well as green energy transition. Even though considerable resilience has been displayed by the global economy, particularly in the early recovery stages, economic activity still lags behind pre-pandemic levels. Disparities between regions is especially widening in emerging market and developing economies.
The factors that continue to hinder a robust recovery are multiple, including withdrawal of fiscal support, the Ukraine conflict, cyclical aspects related to monetary policy tightening, geo-economic fragmentation and more. Even though the odds of a hard landing have gone down, the risks to global growth persist. Effective policies and structural reforms have to be put in place to navigate these challenges and achieve a robust and sustainable recovery successfully.