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Global Economic Forecasts: Q1 2023

January 2023

The global economy is forecast to slow considerably in 2023, edging close to recession as it continues to face ripple effects and lingering risks resulting from the war in Ukraine. Businesses and consumers will see persistent price pressures combined with an increasingly restrictive impact of rising interest rates on economic activity. The US and the Eurozone will record particularly weak growth while China’s reopening and rising economies especially in Asia Pacific will mitigate the global slow

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This report comes in PPT.

Key Findings

The global economy slows sharply due to persistent inflation, restrictive monetary policy and geopolitical tensions

The global economic outlook for 2023 is among the weakest in decades, with global real GDP growth forecast to increase by 2.3% in 2023. The economic fallout from Russia’s invasion of Ukraine will weigh heavily on growth as demand is dampened by persistent inflation and the increasing impact of rising borrowing costs for businesses and consumers. In addition, the sharply reduced growth projection for 2023 remains fragile, as the global economy faces multiple headwinds, including immediate risks emanating from the ongoing war in Ukraine, elevated geopolitical volatility more broadly and rising economic fragmentation.

The US and Eurozone will edge closer to recession amid the slowing effect of surging interest rates

The US and the Eurozone still face the risk of recession with growth stalling in 2023. Both economies unexpectedly avoided recession in late 2022 behind resilient consumer spending and falling energy prices. However, elevated inflation excluding energy and food prices, paired with rising interest rates, will noticeably reduce private sector confidence and slow economic activity. In addition, the Eurozone will continue to face high energy uncertainty, particularly with regard to natural gas imports and electricity generation.

China‘s reopening and emerging market strength provide sources of optimism

Despite a bleak outlook and lingering risks, the global economy will see several growth impulses. China’s reopening following the unexpected end to its zero-COVID policy bears the potential of significantly mitigating the global downturn. Moreover, numerous emerging markets have proved resilient amid surging inflation, increasing interest rates and exchange rate volatility. This relative strength of economies, particularly in Asia Pacific, is expected to additionally support growth in 2023. 

Key findings
Global baseline outlook: Global economy edges closer to recession amid sharp slowdown
Global inflation begins gradual downward trend – but remains significantly elevated in 2023
Geopolitical tensions will be primary global inflation risk
Multiple downside risks could tip fragile global economy into recession in 2023
Real GDP annual growth forecasts and revisions from last quarter – AE
Real GDP annual growth forecasts and revisions from last quarter – EMDE
Inflation forecasts
Central bank interest rates quarterly forecasts
Global risk map: Significant global stagflation risk
Global Risk Index scores and rankings
Global stagflation scenario: Vulnerabilities remain high for major economies
COVID-19 pessimistic scenario: Worsening pandemic still a risk
US: Resilient consumer spending mitigates recession risks in early 2023
US: Services inflation remains persistent while overall price rises further abate
U S: Ongoing Fed interest rates hikes raise likelihood of recession in 2023
US: Significant domestic and global risks cloud forecast period
China: Economic growth to pick up later in 2023 amid the post-pandemic reopening
China: Heightened uncertainty weighs on consumer and business confidence
China: Forecast risks
India: Economic growth to ease on the back of softer domestic and foreign demand
India: Forecast risks
Japan: Weaker exports and faltering pent-up spending to subdue future growth
Japan: Forecast risks
Indonesia: Softer external demand to limit economic growth in the year ahead
Eurozone: Milder-than-expected temperatures likely prevent a severe energy crisis
Eurozone: Energy prices ease significantly, while pressure from wage growth rises
Eurozone: Ongoing energy vulnerability will drive elevated economic uncertainty in 2023
UK: High inflation and rising interest rates continue to pressure consumers and businesses
UK: Forecast risks
Russia: Economic problems to persist in 2023
Russia: Forecast risks
Brazil: Restrictive monetary and fiscal policies to curb inflation and limit economic growth
Brazil: Forecast risks
Mexico: Downturn in the US is expected to slow growth momentum
Summary 1 baseline scenario and main downside risks: Q1 2023


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