Global Forecast Update (December 2022)

Global real GDP growth is slowing rapidly, from 5 percent year over year in Q3 of 2021 to 3.3 percent in Q3 of 2022. As headwinds to global growth are intensifying, we expect yearly global GDP growth to moderate further to about 2 percent from Q4 2022 onward. Headwinds include persistent inflationary pressures limiting demand and production, very rapid tightening of global financial conditions, and low levels of business and consumer confidence in large economies around the world.

The Conference Board Global Leading Economic Index has contracted for a couple of months now, pointing to rising risks of a downturn. Our forecast for global GDP is for 3.2 percent growth in 2022 and 2.1 percent in 2023. Global growth of 2.1 percent does not formally constitute a global recession, but if achieved it would be the weakest growth rate since 2001 (outside of global recession years 2009 and 2020). In 2024, the global economy likely will experience a modest revival to 2.7 percent growth as shocks related to the pandemic, inflation, and monetary tightening fade. However, growth rates in 2024 and beyond are likely to be below the prepandemic trend.

For more resources on the global economy, please see our monthly updated Global Economic Outlook page, quarterly StraightTalk publication and annual long-term outlook (October 2022).

United States

We continue to project a brief and relatively mild recession in the US, likely starting around the turn of the year and extending through Q3 2023. CEO confidence, consumer confidence, and leading indicator gauges all point to recession in 2023. The recession reflects aggressive Fed monetary policy tightening to wrestle inflation back to the 2 percent target.

After growing by an estimated 1.9 percent in 2022, real GDP is forecast to stagnate for the full year of 2023 and pick up again in 2024 with 1.7 percent growth.

For more resources on the US economy, please see our monthly updated forecast, monthly Economy Watch webcast, monthly report and annual long-term outlook (November 2022).

Europe

Europe has likely entered into recession as of Q4 2022 and probably will remain so into the early part of 2023. European economies expected to experience recession include large economies such as Italy, Germany, and the UK, as well as smaller economies such as Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and Switzerland. CEO confidence fell to an all-time low in H2 2022, reflecting the challenging outlook ahead. Still, a variety of factors including fading supply chain woes, a robust labor market, and fiscal stimulus portend a short and shallow recession.

After growing by an estimated 3.5 percent in 2022, real GDP is forecast to slow to 0.2 percent growth for the full year of 2023 and pick up again in 2024 with 1.1 percent growth.

For more resources on the European economy, please see our monthly Economy Watch report and annual long-term outlook (October 2022).

China

The Chinese economy has been buffeted by significant challenges from the pandemic, housing, and external trade in 2022. Businesses and consumers chafed at mobility restrictions and lockdowns, and the government has responded by softening its dynamic zero-COVID-19 policies. Confidence among multinational company CEOs improved in H2 2022 in anticipation of better economic performance in 2023. Still, China is not ready to fully shift away from the polices, given low vaccination rates among the elderly and widespread fear of the virus among the general population. Even once restrictions are lifted, there will be an adjustment period as the fear factor subsides. This points to H2 2023 as the period for a resurgence of consumer spending on services, limiting full-year 2023 growth.

After growing by an estimated 2.7 percent in 2022, real GDP is forecast to pick up to 5.1 percent growth for the full year of 2023 and 4.8 percent for 2024.

For more resources on the Chinese economy, please see our monthly Economy Watch report and annual long-term outlook (November 2022).

Emerging Markets

Economic conditions for economies outside China, Europe, and the US are expected to be mixed. While Asian economies apart from China have fared well from reopening postpandemic, slowing external demand as the US and Europe head toward recession is beginning to cloud growth prospects. The same is true for Latin American economies dependent upon trade with the US and in commodities, whose prices have retreated from early-year peaks. Tighter monetary policy and political instability threatening fiscal outlooks are also troubling select Latin American economies. Elsewhere, Turkey will experience materially slower growth in 2023, but it will avoid recession. Russia and Ukraine will remain in recession due to the ongoing conflict, sanctions (Russia), and widespread destruction (Ukraine).

For more resources on the emerging market economies, please see our monthly Economy Watch report.

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