A look into 2023: slowing growth and inflation as policy consolidates efforts.The stronger-than-expected economic growth in the third quarter was encouraging, with the economy showing resilience despite persistent domestic bottlenecks. While the current-year outlook is more optimistic than earlier expectations, headwinds abound. On a global level, the stagflationary environment has become more entrenched, while monetary conditions have tightened to contain runaway inflation. The latest International Monetary Fund (IMF) World Economic Outlook (WEO) shows that the global economy will grow by 2.7% next year compared to the 3.6% that it had expected at the WEO in October last year. Similarly, global inflation is expected to average 6.5% next year compared to the prediction of 3.3% in October 2021. In addition, a third of the global economy could experience a recession this year or next year, with inevitable spillovers. In particular, the anticipated global economic slowdown will have implications for the domestic economy through the export and financial flow channels over the next three to eighteen months. Export market frictions, given a rise in protectionist policies, and continued geopolitical tensions pose additional risks to global activity.
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