Global Economic Forecasts: Q2 2023

May 2023

The global economy is forecast to slow considerably in 2023. This comes as businesses and consumers remain constrained by the adverse combination of persistent inflation and high interest rates. Amidst the sharp slowdown, growth prospects have slightly improved. This is in part due to unexpected resilience in the US and Eurozone. Yet, with advanced economies mostly stagnant, it will be emerging economies driving global growth, especially in Asia Pacific, spurred by China’s rapid recovery.

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This report comes in PPT.

Key Findings

The global outlook sees slight improvement amid slowdown in 2023

The global economy is expected to slow significantly in 2023, with global real GDP forecast to increase by 2.5%. This constitutes low growth by historical standards, resulting from persistent inflation and rising interest rates, affecting businesses and consumers globally. Yet, the global economic outlook has slightly improved, with the growth momentum reversing both in advanced and emerging economies amid high resilience and China’s recovery. Nonetheless, uncertainty remains unusually high due to a multitude of risks and headwinds which keeps the likelihood of a downside scenario for the global economy in 2023 elevated.

Resilience in the US and Eurozone will be tested as high inflation and rising interest rates weigh on growth

The US and Eurozone will record low growth in 2023, with real GDP increasing by 0.9% and 0.5%, respectively. However, both economies have surprised to the upside in Q1 2023, with labour markets remaining tight and consumer spending still resilient, leading to a slightly improved outlook. However, persistent inflation, excluding food and energy, as well as steadily rising interest rates will weigh on growth in the US and Eurozone in 2023. Financial instability in the US has added a further layer of uncertainty over the economic trajectory.

Growing emerging market strength results in an increasingly multi-speed global economy

The global economy will see a considerable discrepancy in the growth between advanced and emerging economies in 2023. China’s faster-than-expected rebound following its post-pandemic reopening will support global growth and add further impulses to a region that has seen a significant and continuous economic expansion. Even amid multiple headwinds, economies in Asia Pacific, including India, Indonesia and Vietnam, have continued to surge, thereby fuelling the global economy in 2023. This is further supported by other emerging markets, particularly the Gulf countries.

Key findings
Global baseline outlook: Improved growth in an increasingly multi-speed global economy
Global inflation moderates only gradually as price pressures show signs of persistence
Rising geopolitical tensions present substantial inflation risks in the short to medium term
Likelihood of a global downside scenario remains significant amid multitude of risks
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 scenario map : Stagflation remains key global downside risk
Global Risk Index scores and rankings
Global stagflation scenario: Vulnerabilities remain high for major economies
Global bounce back scenario: Faster-than-expected bounce back possible with risks abating
US: Growth momentum shows resilience despite mounting headwinds
US: Inflation abates as energy prices ease - yet, underlying price pressures persist
U S: The banking turmoil has increased the likelihood of a hard landing scenario
US: Significant domestic and global risks cloud forecast period
China: Rebound in private consumption and surging investment to support economic growth
China: Consumer and business confidence improve on the back of economic reopening
China: Forecast risks
India: Economic growth to ease, but will remain one of the strongest globally
India: Forecast risks
Japan: Weak foreign demand and high inflation are key downside risks
Japan: Forecast risks
Indonesia: Economic growth to ease amid weaker exports growth
Eurozone: Outlook and confidence improve as energy markets normalise
Eurozone: Overall inflation eases amid energy price drop – but core inflation has yet to peak
Eurozone: Upside and downside scenarios among potential outcomes amid high uncertainty
UK: Outlook clouded by persistent inflation, high interest rates and weak external prospects
UK: Forecast risks
Russia: Outlook remains subdued by the ramifications of the war in Ukraine
Russia: Forecast risks
Brazil: Conflicting monetary and fiscal policies fuel uncertainties and hamper growth
Brazil: Forecast risks
Mexico: Outlook slightly improves as consumer spending and manufacturing rebound
Baseline and main alternative scenarios: Q2 2023
Other alternative scenarios: Q2 2023


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