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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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Tighter credit conditions prompt downgrade to 2024 growth

• The ongoing resilience of recent economic data has prompted us to raise our world GDP growth forecast for 2023 by 0.1ppt to 1.9%. However, we have lowered our growth forecast for 2024 by 0.3ppts to 2.2% because we believe recent events in the banking sector will likely prompt further tightening of banks’ credit conditions.
• Economic data have continued to strike a reasonably optimistic tone over the past month. The J.P. Morgan Global Composite PMI maintained its recent uptrend in March to reach a nine-month high of 53.4. China has staged a more robust rebound following the end of the zero-Covid policy than we had initially envisaged, while US consumers continued to spend.
• The stronger start to this year has mechanically raised our calendar year 2023 GDP growth forecast, but we expect GDP growth on a quarter-on-quarter basis to ease from here (Chart 1). China’s Q1’s strength is likely to prove short-lived. In fact, the more front-loaded recovery in activity following the easing of pandemic restrictions likely indicates growth will be more, rather than less, subdued over the remainder of this year.
• In advanced economies, we expect the lagged effects of ongoing monetary policy tightening by the main central banks to limit growth over the remainder of 2023 and in early 2024. We expect the slowdown in growth will be particularly acute in H2 of this year as the US enters recession. Indeed, we continue to expect the Fed will hike by a further cumulative 50bps and the ECB by 75bps this year.
• Inflation is still much higher than most central banks’ targets, leading us to raise our US and eurozone CPI inflation forecasts. We expect policymakers will continue to rely on their financial stability toolkits to deal with any problems in the banking sector.
• Our forecasts assume that the recent banking sector struggles won’t morph into a full-blown financial crisis, but we expect the current situation to exacerbate the ongoing tightening in credit conditions. This is a key driver of the 0.3ppts reduction in our world GDP forecast for 2024.

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