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World Economic Prospects

Each month Oxford Economics’ team of 250 economists updates our baseline forecast for 200 countries using our Global Economic Model, the only fully integrated economic forecasting framework of its kind. Below is a summary of our analysis on the latest economic developments, and headline forecasts. To access the full report (and much more), request a free trial today.

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Energy crisis prompts further downgrades

• The bad news keeps coming, particularly for Europe. The further surge in gas prices along with uncertainty about future supply from Russia leaves most of Europe on the cusp of a recession. We have made a further substantial downgrade to our economic forecasts and expect global GDP to slow from 2.8% in 2022 to just 1.7% in 2023, 0.6ppts lower than our forecast a month ago.
• European gas prices rose substantially over the summer, and we have become increasingly cautious about the speed and extent to which they fall back over the next couple of years. Considerably higher energy costs will significantly squeeze household incomes, prompting us to raise our eurozone CPI inflation forecast for next year by 2.2ppts to 4.3%. Higher costs could trigger a wave of business closures, exacerbating the hit to the economy. In addition, more aggressive rate hikes by both the ECB and Bank of England now seem likely, as concerns about sustained high inflation are mounting.
• We have cut our eurozone and UK GDP forecasts for 2023 and expect only slightly positive growth at best in 2023. A deeper downturn is possible if gas prices continue to rise or energy rationing is required. But more substantial government support to limit the near-term pain and reduce uncertainty about prices and supply in the long term could trigger upside surprises.
• We have also become more cautious about the US outlook. A combination of faster Fed tightening, stickier inflation, and a weaker labour market means that we now anticipate a mild US recession at the start of next year.
• Although China bucks the trend and is expected to see an increase in GDP growth next year, the improvement largely reflects a post-lockdown rebound in activity, which will prove temporary.
• Overall, we expect a large number of economies, particularly in Europe, to enter recession over the coming quarters. But as with the 2001 ‘dotcom’ downturn, the global economy is expected to narrowly avoid a technical recession, defined as two quarters of falling per capita global GDP. On the whole, we expect country-level recessions to be relatively short and mild and to cease as the swathes of adverse shocks dissipate.
• However, with neither Chinese nor advanced economy policymakers likely to provide enough support to give the global economy a major boost, we wouldn’t bank on an especially sharp economic rebound.

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