Global Economic Forecasts: Q3 2023

July 2023

The global economy remains in the midst of a significant slowdown in Q3 2023. Economic activity is dampened as businesses and consumers globally face persistent inflation and further rises in interest rates in most countries. However, strong labour markets and resilience in services have contributed to a further slight improvement in the global outlook. Diverging trends within the global economy persist, as developing economies, especially emerging Asia, continue to outperform advanced economies

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This report comes in PPT.

Key findings

Sentiment further improves while overall outlook remains weak

The global economy is in the midst of a significant slowdown, as real GDP growth is expected to decelerate to 2.6% in 2023. While this remains far below the long-term growth trend, the global outlook has seen gradual improvements in recent quarters. This has been driven especially by resilience in the services sector and labour markets despite persistent inflation and high interest rates in most countries. Lingering inflation and the lagged effect of high borrowing costs will continue to keep global growth subdued at 2.9% in 2024.

Trajectories and drivers between major economies increasingly differ

The US and the Eurozone are expected to see weak growth in 2023, with real GDP increasing by 1.2% and 0.6%, respectively. While facing similar headwinds in terms of elevated inflation and rising interest rates, the US outlook has improved more significantly, as both economies saw a forecast of 0.2% growth in Q1 2023. China remains a key driver of the global economy in 2023, with 5.3% growth. However, the country’s post-pandemic recovery has slowed notably, raising concerns about a lower contribution to global growth in 2024.

Emerging and developing economies continue to defy the global trend

Emerging and developing economies remain the growth of engine of the global economy in 2023. At 3.9% real GDP growth compared to 1.0% for advanced economies, emerging and developing economies will continue to increase their global economic share. This is particularly the case for the Asia Pacific region where four economies will grow at more than 5% in 2023: China (5.3%), India (5.8%), the Philippines (5.6%) and Vietnam (5.5%). In 2024, India and Vietnam are even expected to grow at more than 6%.

Key findings
Global baseline outlook: Optimism increases amidst weak and fragile growth environment
Global inflation slowdown comes with increasingly diverging trends between key economies
Geopolitical instability remains key risk of global inflation resurgence in the short term
Multifaceted high-impact risks continue to cloud the recovery of the global economy 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 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 recovery possible with risks abating
Global Fragmentation scenario: A long-term drag on the global economy
US: Resilience in consumer spending raises cautious optimism that recession can be avoided
US: Wage growth will continue to be major inflation driver until labour market cools
U S: Consumer and business confidence levels to improve from recessionary levels
US: Hard landing scenario remains realistic as financial conditions tighten further
China: Economic recovery slows as consumer spending and foreign demand falter
China: Consumer and business sentiment subdued amid fragile post-pandemic recovery
China: Low confidence, looming deflation and property downturn are major risks
India: A strong push in public spending to support short- and medium-term growth
India: More weather disruptions could slash agricultural output and reignite inflation
Japan: Services sector’s recovery facilitates growth, but weak foreign demand is a risk
Japan: Volatile commodity prices and weak yen raise risks for Japanese firms and consumers
Indonesia: Domestic demand supports outlook, but falling exports a key growth constraint
Eurozone: Growth remains stagnant, though slowing inflation points to gradual improvement
Eurozone: Labour costs will become dominant source of persistent inflation going forward
Eurozone: Uncertainty remains unusually high in volatile economic and geopolitical phase
UK: Outlook improves as economy shows resilience, but multiple headwinds persist
UK: Sharper global slowdown, stubborn inflation and longer strikes among biggest risks
Russia: Outlook improves on resilient domestic demand, but external risks remain
Russia: Harder ramifications of the war in Ukraine are a major risk
Brazil: Agricultural sector boosts economy, but drag from restrictive monetary policy grows
Brazil: Extended period of peak interest rates presents key short-term growth risk
Mexico: Fastest growth expected in Latin America in 2023 due to re-accelerating economy
Baseline and key alternative scenarios: Q3 2023
Other alternative scenarios: Q3 2023


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