The war in Ukraine, high food and energy prices, the fight against inflation, the looming recession, the transition to renewable energy, and China's uncertain post-pandemic path present just some of the entangling challenges that will preoccupy the global economy in the following years, according to Allianz Research's recently published Economic Outlook 2023-2024 report.

Thus, with significant differences across countries, global growth is likely to slow down to +1.4% in 2023 and recover modestly to +2.8% in 2024. Advanced economies are heading toward a mild recession of -0.1% in 2023, followed by a rebound to below-potential growth of +1.5% in 2024.

Although the Eurozone will most likely be able to avoid gas rationing, persistently high energy prices will bring recession with the new year. Allianz economists expect a bottom-out in the first half of 2023, followed by a shallow recovery and anticipate only a modest pick-up in 2024-25 for countries with a higher dependence on gas and larger manufacturing sectors (like Germany).

Thanks to mainly strong exports and a large backlog of previously unfulfilled orders in the manufacturing sector, coupled with steady consumption, the U.S.'s economy has proven to be resilient although it is facing rapid monetary tightening and elevated inflation.

"Both Europe and the U.S. are heading for a mild recession in 2023. But while 2024 could bring about a recovery in the U.S., the Eurozone could still be stuck in a muddle-through scenario because of the energy stop-and-go," says Ludovic Subran, Allianz Chief Economist.

China's growth will most likely be negative in the last quarter of 2022, but is likely to slowly grow in the first quarter of 2023. Strong global headwinds and additional domestic challenges as well as political uncertainties will hit emerging markets (EMs) and developing economies (DEs) in various country-specific ways.

CEE countries will be most affected as they face an energy-supply crisis on top of the energy-price crisis. Many developing economies in Africa and Asia as well as non-commodity exporters in the Middle East will also continue to suffer from the food- and energy-price surge and are especially vulnerable to increased social risk as a result. Major emerging markets in Latin America will benefit from the commodity price boom and a strong job market.

Global trade continues to slow down as industrial activity recedes despite easing supply-side constraints. Global trade in goods and services is expected to grow by only +0.7% in volume terms in 2023 and to contract by -1.3% in value terms.