Greece, South Korea and the US are the top three economic performers, while many Nordic countries have a bleak 2023, according to the Economist.
Most had predicted a global recession in 2023, as central banks raised interest rates to cool inflation. But that was wrong. Global GDP is likely to grow by 3% this year. The job market has held firm. Inflation has trended lower. Stock markets have risen by 20%. But that overall result does not reveal the vast differences between economies.
The Economist compiled data on five indicators: inflation, inflation breadth, GDP, employment and stock market performance for 35 economies, mostly rich ones. The combined scores were used to rank the performance of developed economies over the past year, with some surprising results.
Data source: Economist
Leading the pack for the second year in a row is Greece, a remarkable result for an economy that until recently was labeled as mismanaged. The country has been recovering since 2018, after a decades-long debt crisis forced it to accept three international bailouts.
This year, the strong economic performance is reflected in higher-than-expected tax revenues. The International Monetary Fund (IMF) assesses that private consumption here is supported by positive real wage growth, while investment activity continues to expand thanks to the National Recovery Plan (NRRP). This year, Greece's GDP is estimated to grow by 2.4%.
The country is expecting faster economic growth of 2.9% in 2024, driven by strong tourism, investment and higher domestic demand, while inflation and unemployment continue to improve.
In second place, the South Korean economy has faced many challenges this year but has gradually improved thanks to exports, especially semiconductors. Exports fell for 12 consecutive months before rising again from October. In November, chip sales increased for the first time since August 2022. Semiconductors were one of the items with the largest export proportion last month, accounting for 17%.
The US, ranked third, is set to see significant growth throughout 2023 despite previous pessimistic forecasts. In December 2022, the Blue Chip Economic Forecast predicted a 0.1% contraction in GDP. But the latest forecast suggests a 2.6% gain, driven by strong consumer spending, a resurgence in manufacturing investment and increased government purchases.
Real US GDP this year even exceeded pre-pandemic forecasts from the Congressional Budget Office and the International Monetary Fund, according to the White House.
US GDP (billion USD) at constant 2017 prices. The solid line is the actual result, the dashed line is the forecast made in January 2023. Source: White House
In the upper group of the rankings, some American countries such as Canada and Chile also have high positions, ranked 6th and 7th respectively. Meanwhile, many poor performing countries are in Northern Europe, including the UK (30th), Germany (27th), Sweden (31st) and at the bottom is Finland.
Looking at each of the measures reveals the health of each rich economy. First, tackling rising prices will be a major challenge in 2023. So it’s worth looking at core inflation, which strips out volatile groups like energy and food.
Japan and South Korea have kept prices under control. In Switzerland, core inflation rose just 1.3% year-on-year in 2022. But elsewhere in Europe, many countries remain under severe pressure. In Hungary, annual core inflation was 11%. Finland, which relies heavily on Russian energy supplies, is also struggling.
In most developed countries, inflation is becoming more bearable, as measured by the inflation rate, which measures the share of items in the consumer price basket that have increased in price by more than 2% year-on-year. The central banks of Chile and South Korea have raised interest rates significantly in 2022, much earlier than other developed countries, so they appear to be benefiting. In South Korea, the inflation rate has fallen from 73% to 60%. Central banks in the US and Canada have also benefited from the fall in inflation.
Elsewhere, however, the fight against inflation is far from over. Inflation in Australia, for example, is persistent, with prices rising by more than 2% on nearly 90% of the average person’s shopping basket. France and Germany are also struggling. In Spain, inflation has been getting worse over time.
The next two measures are employment growth and GDP. As a result, nowhere is doing particularly well. Productivity growth is weak worldwide, limiting the potential for GDP growth. Labor markets are already tight in early 2023, leaving little room for improvement in employment.
German Chancellor Olaf Scholz (left) and Greek Prime Minister Kyriakos Mitsotakis in Athens on October 27. Photo: AFP .
But only a few countries actually saw GDP shrink. Ireland was the worst performer, with a 4.1% drop. Estonia also performed poorly, having been hit hard by the conflict in Ukraine. The UK and Germany also face challenges. Germany is struggling with the fallout from an energy price shock and growing competition from Chinese autos. Britain, meanwhile, is still dealing with the fallout from Brexit. Most economists expect the country to continue to grow weakly in the years ahead.
The US, by contrast, has done well in both GDP and employment, benefiting from record energy production and a generous fiscal stimulus package in 2020 and 2021. The world’s largest economy has also helped other countries. Employment in Canada, for example, has increased. And Israel, which counts the US as its largest trading partner, has risen to fourth overall, although the war with Hamas that began in October has made the outlook for 2024 uncertain.
One might think that the US stock market, home to companies poised to benefit from the AI revolution, would do well. But in fact, adjusted for inflation, the performance has been mediocre. The Australian stock market has underperformed.
The Finnish stock market had a terrible year, with Nokia’s share price continuing its slow and prolonged decline. In contrast, Japanese companies are experiencing a renaissance thanks to corporate governance reforms. The Japanese stock market was one of the best performers in 2023, up nearly 20% in real terms.
But the brightest spot has been Greece, where the stock market has risen more than 40% in real terms in 2023. Investors have poured money back into Greek companies as the government has implemented a series of market-supporting reforms.
Although the country remains much poorer than before its bankruptcy in the early 2010s, the IMF – which has been at odds with Greece – praised the “digital transformation of the economy” and “increasing market competition” in a recent statement.
Looking ahead to 2024 for the large rich economy, the Organization for Economic Cooperation and Development (OECD) forecasts US GDP growth to slow to 1.5% in 2024 and then pick up slightly to 1.7% in 2025 as monetary policy is expected to ease.
In the eurozone, which has been hit particularly hard by the Ukraine conflict and the energy price shock, GDP growth next year is expected to improve to 0.9%, from an expected 0.6% this year. In the region, major economies such as Germany, Italy and France are expected to grow by 0.6%, 0.7% and 0.8% respectively, all below the OECD average of 1.4%.
Phien An ( according to Economist, Reuters, Yonhap )
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