Macroeconomic development

According to the International Monetary Fund (IMF), the global economy performed better in the 2023 financial year than anticipated at the start of the year. The IMF estimates that the global economy as a whole grew by 3.1 % in the 2023 financial year. The marked slowdown in global economic activity that was feared in many quarters due to high inflation rates in 2022 and the resulting sharp response of monetary policy failed to materialise. Instead, inflation fell more rapidly than initially assumed. As a result, economic growth in the second half of 2023 – particularly in the United States and several major emerging and developing nations – was stronger than expected, according to the IMF. However, this growing momentum was not felt everywhere, and growth remained low from a long-term perspective. Despite the resolution of supply chain problems from the time of the pandemic and faster delivery times, world trade remained flat throughout the year and was down significantly on the previous year at 0.4 %..

Several advanced economies proved to be surprisingly resilient. Total economic output rose by 1.6 % in 2023. The US economy recorded unexpectedly robust growth of 2.5 % despite still being held back by high interest rates. Growth in the eurozone was hampered by weak consumer sentiment, the ongoing impact of the economic crisis and a sluggish economy. In its most recent assessment, the IMF estimates that gross domestic product (GDP) in the eurozone grew only marginally by 0.5 % in 2023. As an export nation, Germany suffered from weak global demand, high inflation – especially with regard to energy costs – and the restrictive monetary policy. This was compounded by a crisis in the construction industry due to a wave of cancellations in residential developments. In addition, the German economy was afflicted by a series of non-recurring factors. These included a high sickness rate and the strikes of national rail operator Deutsche Bahn. In light of the shrinking economy in the final quarter, the IMF anticipates that the economic output of Europe’s largest economy declined by 0.3 % for the year as a whole. Italy is also expected to have suffered a decrease in GDP to 0.7 %.

By contrast, the emerging economies performed well on the whole, despite the challenging conditions. Here too, significant differences were observed in terms of momentum. According to IMF estimates, overall economic growth reached 4.1 % in 2023. China’s export-driven economy suffered from weak global demand, the crisis in the property market and a weak domestic market, but experienced a surprising resurgence towards the end of the year. According to the IMF’s economists, the world’s second largest economy grew by 5.2 % in 2023 and thus even reached the Chinese government’s growth target of “around five percent”. From a long-term perspective, however, this represents one of China’s weakest growth rates.

Following the decline in economic activity due to its invasion of Ukraine and the subsequent sanctions imposed by the West, the Russian economy appears to have continued its recovery. Increases in output and earnings are mainly attributable to government contracts, not least for armaments, and increased transfer payments, while export volumes have declined strongly. According to IMF estimates, Russia’s GDP grew by 3.0 % in 2023. Following the economic slump in 2022 as a consequence of the Russian invasion, the IMF also expects Ukraine to return to slight economic growth of 2.0 % in 2023. By contrast, the IMF’s experts estimate that the Estonian economy will shrink by 2.3 % (IMF, October 2023).