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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.

China triggers a further downgrade to the outlook

• Ongoing lockdowns and restrictions in China have prompted us to lower our Chinese GDP growth forecast for this year and become more pessimistic about the easing of global supply chain bottlenecks. Therefore, we have lowered our global GDP growth forecasts by 0.4ppts to 3% in 2022 and by 0.1ppt to 3.1% in 2023.
• A range of timely activity indicators confirms that China’s zero tolerance approach to Covid is taking a heavy toll on the economy. We now expect the Chinese economy to grow by just 4% this year, a downward revision of 0.8ppts from our forecast last month, but the true scale of the economic damage may be bigger than the official figures will eventually show.
• Although economic weakness in China could help to reduce commodity prices, the downward influence on global inflationary pressures might be offset by greater price pressures arising from supply chain disruptions. We have nudged up our inflation forecasts for early 2023.
• Despite the deteriorating global economic outlook, many central banks in both advanced economies and emerging markets have either tightened policy by more than previously expected or signalled a more aggressive future path for rates. While we have kept our Fed policy rate forecast unchanged, we now expect the ECB to raise interest rates three times this year and see two further 25bps increases by the Bank of England in 2022. We have also revised up our policy rate forecasts for several emerging markets.
• It is understandable that central banks have felt the need to raise rates due to inflation dramatically outpacing their own expectations. However, we continue to expect headline inflation rates to fall back sharply in late 2022 and for inflation to undershoot consensus and central bank targets in many economies by late 2023. Against this backdrop, we still think that markets are overstating the likely extent of policy tightening.
• While the global economic outlook has continued to deteriorate amid considerably high uncertainty, we would characterise 2022 as a year of weak growth even by post-GFC standards, rather than a lurch towards recession. Indeed, with both the real income squeeze and restrictions in China set to ease in H2, we expect the global economy to regain some momentum in the second half of this year.

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