The present global situation is challenging because of shifts in global trade dynamics, incipient global demand, commodity price fluctuations, uncertainties stemming from pandemic recovery and the dynamics of geo-politics. Geo-politics is marked by high inflation, deteriorating financial conditions, Russia Ukraine war and growing economic fragmentation. The financial system is constrained by higher inflation, rising interest rates and stress in financial markets.
According to the World Economic Outlook (WEO, July 2023), global growth is projected to fall from an estimated 3.5 per cent in 2022 to 3 per cent in both 2023 and 2024, while global headline inflation is expected to fall from 8.7 per cent in 2022 to 6.8 per cent in 2023 and 5.2 per cent in 2024. China is still struggling with the ravages of the Covid 19 and real estate related disruptions. China’s central bank cut the one-year loan rate by 15 bps to 2.5 per cent, which was followed by July 2023 data indicating weak consumer spending, declining investment, and increasing unemployment. Further, Russia’s central bank hiked its major interest rate from 8.5 per cent to 12 per cent after the rouble crashed to an over 16-month low against the dollar.