Guest Contribution: “The Global Economy as of End-2022”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared at Project Syndicate.

December 24, 2022 — Economists spent most of 2022 convincing themselves that the global economy was about to fall into recession, if it wasn’t already in one.  With the year over, the global recession has now been postponed to 2023.

  1. Tour d’horizon

In the US, reports that a recession had begun in the first half of the year clearly were premature, especially given how tight the labor market was.  It still is. The chances of a downturn in the coming year are well below 100%, despite the confidence with which many say it is certain.  It is foolish to think we can predict a recession with certainty. But the chances are indeed far above the usual 15 %.  The odds are perhaps 50-50 in 2023 and 75% at some point during the next two years.  The main reason is the rapid raising of interest rates by the Fed (and other central banks), which in turn is attributable to high inflation.

Europe, hard-hit by higher energy prices, has worse prospects.  A recession is highly likely, for example as defined by the criterion of two consecutive quarters of negative growth.

China looks to be in still worse shape.  It has the same problems as Europe, plus also the recent collapse of the property sector and the return of Covid-19 due to re-opening without adequate vaccination.  Growth will be far less than what the Chinese had become accustomed to.  But it almost never turns negative.  Even an 8-percentage-point decrease in GDP growth at the time of the Global Financial Crisis, from 14% in 2007 to 6% at the height of the Great Recession in 2009, was not enough to cause Chinese output to shrink in absolute terms. This is one of many illustrations of the drawbacks of defining recession by an automatic rule based on negative GDP growth.

  1. Policy mistakes

In many countries, current woes are substantially self-inflicted.  Governments have made mistakes with consequences that are turning out to be as huge as they were predictable.

Europe over the decade 2011-2021 needlessly made itself dependent on Russian energy, especially natural gas. Russia’s invasion of Ukraine on February 24, 2022, was a still greater blunder.  China’s zero-Covid lock-down policy came at high economic costs in 2022, while the absence of a plan for the end-game meant that the mortality costs were only postponed, as the current re-opening is demonstrating.  Other governments where recent policy-making has been poor include Brazil, India, Mexico, Turkey, and South Africa, among others.

The US, for its part, has made many mistakes.  High on the list is its willful abandonment of leadership of the rules-based liberal international order.  This includes ignoring the WTO and the trade rules that its members had negotiated over many years.  Donald Trump’s tariffs were bad, but Joseph Biden has done little to reverse them, while the “buy American” attributes of the otherwise-laudable Inflation Reduction Act of 2022 went further to flout the agreed rules.

  1. Financial markets in 2022

Although the effects of higher interest rates have hardly begun to show up in slower growth, and still less in labor markets, they have shown up in financial markets over the course of the last year.

American stock prices peaked in January 2022 and trended strongly downward subsequently.  Bonds, real estate, and Emerging Market assets are all down for the year as well. This looks like a long-anticipated bursting of the “everything bubble.”

In July 2021, I gave 9/10 odds that there would be a general bursting of asset bubbles. How could one tell, at the time, that bubbles characterized the climate in financial markets?  Historically high valuations of equity prices — relative to dividends, earnings, or income — were an obvious indication.  But to be fair, real interest rates, and even nominal interest rates, were less than or equal to zero, this time last year.  A low discount rate meant that virtually any level of asset prices could be rationalized as the present discounted value of future income.

Four other kinds of assets entered 2022 more audibly screaming, “I am a bubble!”:  (1) Meme stocks, like Gamestop; (2) Crypto currencies, like Bitcoin and hundreds of others; (3) NFTs (NonFungible Tokens); and (4) SPACs (Special Purpose Acquisition Companies).    Each of these assets was innovative, but not necessarily in a good way.  Each of them all but collapsed during the year.


Should the savvy investor “buy on the dip”?  Stock prices are not yet back down to where they were three years ago, on the eve of the 2020 pandemic.  They may have further to fall before they could be judged in line with economic fundamentals.  The same might be said cryptocurrencies, if one assesses their fundamental value at zero.

  1. Global recession?

So, will there be a global recession in 2023?  We need first to define “global recession”.  Again, the rule of two consecutive quarters of negative growth won’t work, because this criterion is too exclusive: Global growth in the post-war period has seldom fallen below zero, even for a single quarter, let alone two.  Not even the severe oil-shock-induced downturns of 1974 and 1981 qualified. The explanation is that even in times of apparent recession, negative growth among Advanced Economies is usually outweighed by still-positive growth among Emerging Market and Developing Economies.  Two exceptions were the 2008 Global Financial Crisis and the 2020 Covid recession.

The IMF projects global GDP slowing, from 6.0 % in 2021, to 3.2 % in 2022 and 2.7% in 2023 [World Economic Outlook, October 2022]. The OECD forecasts 2.2 % for 2023 [November 2022]. That is a momentous slowdown.  But it still leaves the world economy unlikely to meet a negative-growth threshold.  Even by laxer criteria such as growth below a 2 ½ % threshold, or flat GDP per capita, global recession in 2023 is far from a certainty.



This post written by Jeffrey Frankel.

33 thoughts on “Guest Contribution: “The Global Economy as of End-2022”

  1. Bruce Hall

    Some links regarding global economic growth:

    Varies by region, but in general modest pessimism with inflation abating.

    Dr. Frankel is spot on regarding Europe. The question is will the US be too optimistic about transitioning from fossil fuels to wind/solar/nuclear and find itself dependent on some shady sources of energy to fill the gaps. California may provide some answers. So, too, may the Northeast as it disconnects from natural gas.

    1. pgl

      More worthless links from our village idiot? Now if you actually get around to reading Dr. Frankel’s informative post, you will notice how he links to things worth reading – including his own excellent blog. Which of course Brucie will not read either.

    2. pgl

      “with inflation abating”

      Are there two Bruce Halls? After all the other Bruce Hall is still chirping about double digit inflation.

    3. pgl

      Speaking of economic growth, this chart shows US real GDI.

      Real income as of 2022Q3 was 4.27% higher than it was as of 2020Q4. Why does the matter?

      Well there was this MAGA hat wearing lying troll named Bruce Hall who told us over and over that during the first 17 months of the Biden Presidency that average real income fell by 13.3%. Of course this troll overstated the rise in the price level. But more importantly this troll forgot to factor in any increase in nominal income.

      OK – this troll has decided to change his time frame and in the meantime as well as decided if rich people lose money in the stock market for a few months, they must be worse off.

      Oh wait – Brucie boy hates it when we hold him responsible for his previous lies. So come on Brucie – impress us some more about how you are the expert at misrepresenting reality. We know you can do it.

  2. Barkley Rosser

    Merry Christmas Eve, Professor Frankel, and welcome back. Looks like a generally pretty reasonable assessment.

    I must warn you that our resident China expert, “ltr,” continues to report that deaths from Covid in China remain stuck at the low level of 3.6 per million, a figure repeated repeatedly in conjunction with much higher numbers from other nations. She has not budged from that so far, despite widespread reports of crematoria in China overflowing. But maybe those people have bird flu.

  3. JohnH

    “ Global monthly wages fell in real terms to -0.9 per cent in the first half of the year, the [ILO] study found, marking the first instance of negative growth this century. … As a result, the purchasing power of middle-class families has been reduced, while low-income households have been hit particularly hard.”

    Funny how Frankel didn’t factor that in. It seems that workers’ reduced buying power just doesn’t matter.

    1. pgl

      Are you now insulting Dr, Frankel as your usual uncaring “mainstream” economist. What’s next Jonny boy – going after the Pope?

      1. JohnH

        “Knowledge of history and economics is too important to leave to historians and economists.” –Thomas Piketty

        1. pgl

          Given you got an F in history and an F minus in economics, you probably should just stop babbling. Your mommy is so embarrassed by now – she will have no Xmas dinner for you.

        2. pgl

          has a lot of quotes from Piketty. Too bad you can’t provide the source for what you claimed he said nor can you grasp this one from what he did say:

          “In contrast to what many people in Britain and the United States believe, the true figures on growth (as best one can judge from official national accounts data) show that Britain and the United States have not grown any more rapidly since 1980 than Germany, France, Japan, Denmark, or Sweden. In other words, the reduction of top marginal income tax rates and the rise of top incomes do not seem to have stimulated productivity (contrary to the predictions of supply-side theory) or at any rate did not stimulate productivity enough to be statistically detectable at the macro level.”

          Gee Jonny boy – Thatcher’s and Cameron’s supply-side policies did not fare so well according to Piketty. And yet you continue to shill for the Tories. Go figure!

          1. Moses Herzog

            It’s page 12 of his own book, circa early 2020:


            Why would you doubt an intelligent quote that came from a very intelligent guy?? This is Barkley Rosser type blog hovering or blog lurking. Why not find real things to pick at, rather than just hen-pecking Barkley style?? I believe Barkley is that bored with himself, I think you are not and can do better.

    2. ltr—dgreports/—dcomm/—publ/documents/publication/wcms_862569.pdf

      November 30, 2022

      Global Wage Report 2022–23:
      The impact of inflation and COVID-19 on wages and purchasing power

      Executive Summary


      This edition of the Global Wage Report shows that wages and the purchasing power of households have been dented considerably during the past three years, first by the COVID-19 pandemic and then, as the world economy started to recover from that crisis, by the global rise in inflation. Available evidence for 2022 suggests that rising inflation is causing real wage growth to dip into negative figures in many countries, reducing the purchasing power of the middle class and hitting low-income groups particularly hard. This cost-of-living crisis comes on top of significant losses in the total wage bill for workers and their families during the COVID-19 crisis, which in many countries had the greatest impact on low-income groups. In the absence of adequate policy responses, the near future could see a sharp erosion of the real incomes of workers and their families and an increase in inequality, threatening the economic recovery and possibly fuelling further social unrest….

      Wage indices in the G20 economies

      Looking at a longer period, real wage growth among all G20 countries between 2008 and 2022 was highest in China, where real monthly wages in 2022 were equivalent to about 2.6 times their real value in 2008. In four countries – Italy, Japan, Mexico and the United Kingdom of Great Britain and Northern Ireland – it appears that real wages were lower in 2022 than in 2008….

    3. Barkley Rosser


      But that was for the fird half of the yeatr. Since then they have risen. We have been thgough this already.

      1. pgl

        You need to remind Bruce Hall who claims that real wages fell in November. Brucie is so dumb – he linked to the latest BLS report whose opening sentence talked about how nominal earnings rose by more than the increase in CPI.

  4. ltr

    December 24, 2022

    a ) There were 5,226 coronavirus deaths in China on May 26, 2022.
    b ) There were no coronavirus deaths from May 26, for nearly 6 months, through November 19.
    c ) From November 20 through December 23, 2022 there have been 15 coronavirus deaths in China, bringing the total from 5,226 to 5,241.

    d ) During the nearly 6 months of no coronavirus deaths in China, there were 300 to 500 coronavirus deaths each day in the United States.
    e ) Coronavirus deaths in the United States continue at 200 to 400 each day.
    f ) There have been 1,115,913 coronavirus deaths in the United States through December 23, 2022.

    1. Barkley Rosser


      Well, check out

      So crematoria are filling up in China, but you assure us that only 15 people have died of Covid in the last month. Really? What ate all these people filliing up the crematoria dying of then, please?

  5. ltr

    December 19, 2022

    Cumulative Number of Child COVID-19 Cases

    As of December 15, over 15.1 million children are reported to have tested positive for COVID-19 since the onset of the pandemic according to available state reports. About 147,000 of these cases have been added in the past 4 weeks. This week almost 48,000 child COVID-19 cases were reported. This marks the second consecutive weekly rise in reported child cases, an increase of about 66% from the 29,000 cases reported the week ending December 1.

    15,125,291 total child COVID-19 cases reported, and children represented 18.2% (15,125,291 / 83,133,165) of all cases

    Overall rate: 20,096 cases per 100,000 children in the population

    American Academy of Pediatrics
    Children’s Hospital Association

  6. pgl

    Are you now insulting Dr, Frankel as your usual uncaring “mainstream” economist. What’s next Jonny boy – going after the Pope?

  7. ltr

    December 19, 2022

    China’s COVID-19 fight in numbers: 3.46 billion vaccine doses administered

    As of Saturday, the Chinese mainland had administered nearly 3.46 billion doses of COVID-19 vaccines. Assuming every person needs two doses, that’s enough to vaccinate about 122 percent of the country’s population, and 82 percent of the population for three doses each and 61 percent for four doses.

    China has recently launched a second COVID-19 booster shot, offering a fourth dose to certain groups who had received their first booster shot more than six months earlier.

    1. ltr

      October 28, 2022

      Oral COVID-19 vaccine booster now available

      SHANGHAI — People in Shanghai now have the choice to get vaccinated against COVID-19 in a new way: through the mouth.

      Since this week, the Chinese city has started administering a needle-free COVID-19 vaccine, which can instead be aerosolized and inhaled by vaccine takers.

      “It takes just a few seconds to breathe in,” a resident said after the oral administration at a local vaccination site on Wednesday. “It’s much easier than getting a shot,” said the vaccinee, who had received two intramuscular jabs before.

      The inhalable booster is an adenovirus type 5 vector-based vaccine, jointly developed by a research team led by Chen Wei, an academician at the Chinese Academy of Engineering, and the Chinese biotech company CanSino Biologics Inc. * It is being offered only as a booster dose for previous COVID-19 vaccine recipients.

      “The inhaled dose is 0.1 milliliter. Vaccinees need to put the nozzle of a white bottle into their mouths, inhale the gas inside deeply, and hold a breath for at least five seconds to finish the procedure,” said He Jinhui, a local hospital nurse, who explained the basic vaccination instructions.

      Although the inhaled dose is only about a fifth of a traditional intramuscular vaccine dose, it can elicit a stronger immune response….


    2. ltr

      December 22, 2022

      China promotes booster shots with variety of vaccine choices

      BEIJING — At a vaccination site in Beijing’s Chaoyang District, medics are busy preparing inhalable COVID-19 vaccine doses for individuals, who are provided with the option to inhale the needle-free vaccine after it was aerosolized.

      “The vaccine tasted a little sweet, which was good for me,” said a vaccine recipient, adding that she is afraid of injection and chose the inhalable vaccine as her second booster shot.

      The inhalable version is an adenovirus type 5 vector-based vaccine. It has an inhaled dose of 0.1 milliliter, only about a fifth of a traditional intramuscular vaccine dose, and compared with injection, it can induce one more type of immune response — mucosal immunity.

      The inhalable vaccine was approved as a booster shot for people who have been inoculated with two doses of inactivated vaccines for a period of six months or longer. It is among the vaccine types which were approved by the Chinese government for inoculators to get boosted against COVID-19….

  8. pgl

    ‘The US, for its part, has made many mistakes. High on the list is its willful abandonment of leadership of the rules-based liberal international order. This includes ignoring the WTO and the trade rules that its members had negotiated over many years. Donald Trump’s tariffs were bad, but Joseph Biden has done little to reverse them, while the “buy American” attributes of the otherwise-laudable Inflation Reduction Act of 2022 went further to flout the agreed rules.’

    Dr. Frankel is at least consistent making the case that short sighted trade protection – whether from Trump or Biden – is short sighted economic policy. Now it seems JohnH has decided to turn on our guest blogger for some odd reason. Oh wait – Jonny boy is against any form of free trade, which explains why this pretend progressive adored Trump.

    1. JohnH

      I was wondering when the free trade fundamentalists would finally get around to noticing what has been happening to their sacred cow. Many of them devoted most of their careers promoting laissez faire globalization. Yet most of them seem to have just disappeared back into the woodwork with nary a complaint. Sanctions here, sanctions there, sanctions everywhere! About face! Yes, sir!

      As Stiglitz noted at Davos, “Gone are the days when everyone seemed to be working for a world without borders; suddenly, everyone recognizes that at least some national borders are key to economic development and security.

      For one-time advocates of unfettered globalisation, this volte face has resulted in cognitive dissonance, because the new suite of policy proposals implies that longstanding rules of the international trading system will be bent or broken. Unable to reconcile friend-shoring with the principle of free and non-discriminatory trade, most of the business and political leaders at Davos resorted to platitudes. There was little soul-searching about how and why things had gone so wrong or about the flawed, hyper-optimistic reasoning that prevailed during globalisation’s heyday….

      After four decades of championing globalisation, it is clear that the Davos crowd mismanaged things. It promised prosperity for developed and developing countries alike. But while corporate giants in the global north grew rich, processes that could have made everyone better off instead made enemies everywhere. ‘Trickle-down economics’, the claim that enriching the wealthy would automatically benefit all, was a swindle—an idea which had neither theory nor evidence behind it.”

      Fact is, the “laissez faire” globalization agenda is not doing so well. World trade to GDP has dropped to levels not seen in twenty years. US trade has fared as poorly.

      And what do the free trade fundamentalists have to say about this? Hello? I can’t hear you!

      1. pgl

        I doubt Dr. Frankel has ever been to Davos. But his discussions on international trade are worth reading. Yea I get it – you have no effing clue what he is saying even though he is very articulate. It is not his fault you are so damn stupid.

      2. pgl

        “World trade to GDP has dropped to levels not seen in twenty years. US trade has fared as poorly.”

        I looked at your charts there. Gee trade fell during the Great Recession. US trade fell during Trump’s stupid trade war. And of course trade fell when the pandemic hit.

        Jonny, Jonny, Jonny, this is no surprise. The real surprise is that you can actually complete a sentence given it is clear your brain rotted years ago. Damn!

      3. Barkley Rosser


        Oh, now you are for free trade or maybe not? Weren’t you just attacking Biden because of the protectionism in his IRA green initiatives? Why, according to you this is about to bring a huge split between US and EU and undermine support in Europe for supporting Ukrine against PUtin’s horrible invasion.

        1. pgl

          Jonny boy is for whatever Putin wants him to be for.

          Just like Bruce Hall is for whatever Kelly Anne Alternative Facts Conway has just emailed Brucie boy.

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