Global Humanitarian Overview 2023

Sharp slowdown of global economy hit by series of shocks

The global economy is slowing down sharply — more than a third of the global economy is expected to shrink in 2022-2023. Events around the world have had devastating knock-on effects, including persistently high levels of global inflation, especially in the United States and major European economies. Substantial economic downturn in China resulting from the property crisis, COVID-19-related lockdowns and the impacts of the war in Ukraine have also played a significant role. These shocks are hitting a world economy that experienced unprecedented contractions in 2020 but has not yet recovered from the pandemic’s far-reaching impacts.

Global economic growth is projected to slow from 6 per cent in 2021 to 3.2 per cent in 2022 to 2.7 per cent in 2023. This is the weakest profile seen in the 2000s, except for the 2008 financial crisis and the acute phase of the pandemic. The three largest economies – the United States, China and the Euro area – will continue to stall. Even when growth is positive, it will feel like a recession because of shrinking real incomes and rising prices. Sub-Saharan Africa had a better-than-anticipated economic recovery in the second half of 2021, but it has been hit hard by surging food and energy prices, rising interest rates to curb inflation and other spillover effects from the war in Ukraine. Global developments reshaped the region’s economic outlook, resulting in economic growth shaved off to 3.6 per cent in 2022 and 3.7 per cent in 2023; this is not enough to make up for the pandemic-related economic losses incurred since 2020.

As of mid-2022, of the 21 HRP countries for which data is available, 17 face lower projected real GDP growth for 2022 and 2023, compared to predictions made in January 2022. For more than eight HRP countries, expected GDP growth in 2023 has been reduced by a percentage point or more, with Mozambique (-3.6), Sudan (-3) and Niger (-2.3) facing the steepest reductions in expected growth. Compounding challenges, such as climate change, the pandemic’s lingering effects, conflict, rising food and fuel prices, and food insecurity, contribute to lower economic growth in these settings.

Rising inflation is a central concern in many countries, increasing price pressures and the risk of social unrest. In 2022, inflation is estimated to reach 7.2 per cent in advanced economies and 10 per cent in emerging markets and developing economies, and it is projected to remain elevated for a longer period. In response to high inflation, many central banks have been forced to raise interest rates, further exacerbating debt vulnerabilities. In sub-Saharan Africa, higher inflation and interest rates are expected to depress real incomes and domestic demand, reduce fiscal space and induce capital outflow across the region. The accompanying increase in poverty is especially concerning in countries where many people are already at high risk of falling into food insecurity, such as DRC, Ethiopia, Lebanon, Liberia, Madagascar, Nigeria, Sierra Leone and Syria.

Global fuel and food price hikes are hitting vulnerable populations in low-income countries the hardest. The increase in energy prices since March 2020 has been the largest since the 1973 oil crisis. Fertilizer prices rose by 220 per cent between April 2020 and March 2022. Food prices rose by 84 per cent over the same period. In addition, the sharp depreciation of the local currency against the US dollar has pushed food prices in domestic terms even higher. For example, wheat prices, which were 7 per cent higher globally in September than in February, were up more than 22 per cent across sub-Saharan Africa.

Recent painful development losses are at risk of becoming entrenched, and the global goal of ending extreme poverty by 2030 is no longer achievable. Shocks since 2020 have set back the progress in reducing global poverty by at least four years. Rising inflation and the far-reaching impacts of the war in Ukraine could lead to an additional 75 million to 95 million people living in poverty, the vast majority of whom live in Africa. Economic hardship and poverty-related drivers are at the root of many protection issues, especially for children, and can increase rates of child labour, child marriage, unsafe migration, sexual exploitation and trafficking.

Nigeria

Ode, Lagos State, Nigeria

Roland Ade and his wife, Evelyne, are refugees from Cameroon. They make shoes inside their cobbler shop in Ijebu Ode. Roland set up the business on a crowded market road in town, but he hopes for a microcredit loan so that he can relocate to a place that’s more accessible for his wheelchair.

UNHCR/Emmanuel Campos

Employment numbers worldwide improved in 2021 but will remain below pre-pandemic rates in 2022 and beyond, disproportionately affecting women and young people. Despite these challenges, remittance flows to low- and middle-income countries made a robust recovery in 2021 and continue to grow in 2022.

Debt pressures continue to grow and prevent Governments from implementing fiscal responses. Humanitarian settings face significant debt risks, with seven HRP countries at high risk of debt distress. Even more countries will experience this troubling reality due to rising interest rates, diminished credit flows, a stronger US dollar and weaker economic growth. Debt-servicing payments were paused during the height of the pandemic, resuming in 2022 just as interest rates began to increase. This makes debt more expensive and less sustainable in humanitarian settings.

Far-reaching debt relief is crucial for many low-income countries. In 2021, wealthy countries pledged to reallocate $100 billion in Special Drawing Rights (SDRs) to lower-income countries. However, none of the reallocated SDRs has reached the lower-income countries to date. Debt-resolution mechanisms remain slow and unpredictable. Recent progress in implementing the G20 Common Framework for Debt Treatments is encouraging, but negotiations are slow and further improvements are urgently needed.

References

  1. IMF, World Economic Outlook Update, October 2022.
  2. Ibid.
  3. Ibid.
  4. Ibid.
  5. IMF, , April 2022.
  6. COVID-19 Data Explorer: Global Humanitarian Operations, Quarterly Highlights: April - June 2022.
  7. Ibid.
  8. IMF, World Economic Outlook Update, October 2022.
  9. World Bank, .
  10. IMF, , April 2021.
  11. World Bank, Commodity Markets Outlook – April 2022..
  12. World Bank, Commodity Markets Outlook – October 2022,..
  13. World Bank, 2022 Poverty and Shared Prosperity Report – October 2022.
  14. Ibid.
  15. UN DESA, The Sustainable Development Goals Report 2022, p. 26.
  16. United Nations Economic Commission for Africa (ECA), Economic Report on Africa 2021. In Africa alone, 58 million people were estimated to be extremely vulnerable to falling into poverty, unless supported by cash or food assistance.
  17. ILO, World Employment and Social Outlook 2022. Global unemployment is projected to stand at 207 million people in 2022, about 21 million more than in 2019.
  18. World Bank, Migration and Development Brief 36. In 2022, remittance flows to low- and middle-income countries are expected to increase by 4.2 per cent to reach $630 billion, following 8.6 per cent growth during 2021, when remittance flows reached $605 billion.
  19. IMF, List of LIC DSAs for PRGT-Eligible Countries, 30 September 2022. HRP countries at high risk of debt distress are Afghanistan, Burundi, Cameroon, CAR, Ethiopia, Haiti and South Sudan.
  20. COVID-19 Data Explorer: Global Humanitarian Operations, Quarterly Highlights: April - June 2022.
  21. IMF, Tracker on the Use of Allocated SDRs.
  22. Only three countries have submitted applications to the Common Framework, notably Chad, Ethiopia and Zambia. Negotiations were still under way at the time of writing.