Global Overview: Growth prospects continue to deteriorate

Further moderate downgrades to the near-term outlook for advanced economies (AEs) have pushed our global GDP forecast perilously close to recession territory – defined as two successive quarters of falling per capita GDP. We now envisage global GDP growth to slow from 2.9% this year to 1.5% in 2023 – the latter is 0.2ppts lower than a month ago and considerably weaker than consensus and the IMF’s forecasts.

What you will learn:

• The key drivers of our global GDP growth downgrade are again the AEs. We now expect the US, eurozone, UK, and Canada all to record GDP contractions in 2023 as high inflation, monetary policy tightening and, in many cases, falling house prices bite.
• The relative resilience of our global growth forecast for next year rests on only a mild slowdown in GDP growth in emerging markets (EMs) from 3.6% this year to 3.4% in 2023. This partly reflects idiosyncratic factors, such as a rebound in Chinese growth as the economy emerges from Covid lockdowns and an easing in the pace of contraction in Russia. Asia may generally prove more resilient due to a later end to Covid-related restrictions than in other parts of the world.
• In comparison to past AE stress periods, we still see relatively small peak-to-trough contractions in GDP. AE recessions are being driven by a series of adverse shocks in quick succession that are taking the wind out of the sails of the economic recovery. We believe growth will resume as these shocks start to dissipate through 2023. This assessment relies on a significant easing of inflation and relatively resilient labour markets