The January 2023 World Economic Outlook Update projects that global growth will fall to 2.9 percent in 2023 but rise to 3.1 percent in 2024. The 2023 forecast is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook but below the historical average. Rising interest rates and the war in Ukraine continue to weigh on economic activity. China’s recent reopening has paved the way for a faster-than-expected recovery. Global inflation is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024, still above pre-pandemic levels.
After several decades of increasing global economic integration, the world is facing the risk of policy-driven geoeconomic fragmentation (GEF). This note explores the ramifications. It identifies multiple channels through which the benefits of globalization were earlier transmitted, and along which, conversely, the costs of GEF are likely to fall, including trade, migration, capital flows, technology diffusion and the provision of global public goods. It explores the consequences of GEF for the international monetary system and the global financial safety net. Finally, it suggests a pragmatic path forward for preserving the benefits of global integration and multilateralism.
Asia has risen to become an innovation powerhouse, contributing to more than half of world patents. The rise of Asia as an innovation hub has been driven by a few frontier countries that have experienced a sharp increase in digital and computer-related patents, supported by solid R&D spending and a large share of researchers in the labor force. Within countries, R&D has become more concentrated in a smaller share of firms in frontier Asia. Empirical evidence using firm-level data highlight that the high concentration in R&D is associated with large dispersion in productivity. External exposure to competition and innovation, including through trade, supports innovation and help close productivity gaps for firms closer to the frontier.
South Asia’s Path to Sustainable and Inclusive Growth highlights the remarkable development progress in South Asia and how the region can advance in the aftermath of the COVID-19 pandemic. Steps include a renewed push toward greater trade and financial openness, while responding proactively to the distributional impact and dislocation associated with this structural transformation. Promoting a green and digital recovery remains important. The book explores ways to accelerate the income convergence process in the region, leveraging on the still-large potential demographic dividend in most of the countries. These include greater economic diversification and export sophistication, trade and foreign direct investment liberalization and participation in global value chains amid shifting regional and global conditions, financial development, and investment in human capital.
A few years ago, when energy was cheaper and more plentiful, the world’s focus was on curbing fossil-fuel use to achieve net-zero carbon emissions. Today, priorities have shifted amid supply threats and price increases since Russia’s invasion of Ukraine. In this issue, leading energy policy experts look at where the clean energy transition stands amid geopolitical tensions.
Limiting global warming to 1.5 to 2°C above preindustrial levels requires rapid cuts in greenhouse gas emissions. This includes methane, which has an outsized impact on temperatures. To date, 125 countries have pledged to cut global methane emissions by 30 percent by 2030. This Note provides background on methane emission sources, presents practical fiscal policy options to cut emissions, and assesses impacts.