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1 Feb 2023

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IMF Report on Global Economic Growth Shows the Developed World Slowing

A projection that showed the UK economy declining by 0.6% this year grabbed the headlines from a new IMF report, but the report was not optimistic for the rest of the developed world, either. It showed what it calls “advanced economies” growing collectively only 1.2% this year, with the US at 1.4%, Germany at 0.1%, and Japan at 1.8%.

The EU as a whole is projected to grow 0.7%. None of those numbers reaches the 2% level conventionally thought to be the dividing line between tangible growth and recession.

Overall GDP growth in and of itself is a broad brush that often does not paint an accurate picture of socioeconomic conditions. If income disparity rises during times of growth, or corruption increases, or an insufficient amount of that growth is targeted at digital infrastructure or education or health care, then the lives of all of a nation's residents don't necessarily improve.

IDCA Research Shows UK Strength
For example, the IDCA EESG Digital Readiness of Nations Index, recently published, considers hundreds of parameters in determining how well a nation is progressing toward positive socioeconomic development, based on a consistent, fairminded development and use of information technology and digital infrastructure.

So even though the IMF report resounded throughout the UK, it's too early to tell to what effects this projection, if true, will have. As it stands, the UK is among the world's Top 25 in the index, ranking in 18th place. It still has the world's fifth-largest economy by some measures, with a renewables grid very similar to that of Germany (which ranks 14th in the index), at around 30%.

Both nations rank in the middle of the pack in this regard among the 147 nations in the index. But the UK is 50% more efficient than Germany in producing GDP relative to its GHG emissions, and its per capita emissions are 40% lower than Germany's.

The UK's social and governance structures remain strong, to date, and are just slightly weaker than Germany's; the UK's perceived corruption has edged slightly higher than Germany.

All of this data means the UK is still well-equipped to achieve significant improvement in its GHG emissions and continue to build out its digital infrastructure. With palpable concern now in the UK over Brexit,with a majority of people thinking it was a mistake, the country certainly bears close watching this year.

The US Has Some Weakness
Contrast the UK's condition with that of the US, which is being projected for lackluster growth in the IMF report. The US has a renewable grid of only around 20%, with rising income disparity, weaker social structures than found in the EU, and perceived corruption higher than that of the UK as well. It ranks 45th in the index, similar to Italy.

The US still has the world's largest economy by far, the world's most developed server infrastructure by far, and a present administration inclined toward aggressive cimate-change abatement.

But political winds could shift quickly as another presidential election begins to approach in 2024, and the world's second-largest GHG emitter faces an enormous challenge. Its economic efficiency is half that of the UK with respect to emissions, and per capita emissions are almost three times higher than those of the UK. A sluggish economy cannot be helpful to improving its prospects.

China and India Face Big Challenges
The IMF report is more optimistic about the developing world, about Asia in general, and about China and India in particular. It forecasts 5.2% growth for China, 6.1% growth for India, and combined economic growth in the two countries equal to 50% of all the growth projected for this year.

The two countries lag in the Digital Readiness Index, currently ranking 86th and 88th, respectively. Their colossal populations, combining for 35% of the world's total population, require a heavy lift to achieve substantial progress. z

The leading and third-leading GHG emissions producers have renewable grids on a par with the US, but an economic efficiency of only 25% to 33% of the US (and thus 12% to 16% of the UK). The social structures of Communist-run China and increasingly authoritarian India are not as strong as that of the US, the UK or the EU.

The IMF report is one way of looking at things. Taking a longer-term view, as the Digital Readiness Index does, shows more optimism for the UK and the developed world than might be taken from th IMF report, while clearly outlining the challenges faced by fast-growing China and India.

Graphic from IMF Blog Report on Global Economy.

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