The global economic outlook has dimmed considerably in the last six months as countries struggle to tame inflation. Global economic growth is projected to retreat sharply from its 2021 rate of 5.8 percent, falling to 2.9 percent in 2022 and 1.8 percent in 2023, with tighter monetary conditions, ongoing disruption from the war in Ukraine, and weaker economic prospects in China to blame.
Recessions loom in several advanced economies. US inflation is still elevated, and the Federal Reserve will likely need to tighten monetary policy considerably further, leading the US economy to shrink in 2023. The euro area and UK economies will all contract in 2023 as an energy crisis and high inflation drag on growth. Although Japan has so far avoided the high inflation hampering growth elsewhere, the Japanese economy will be held back next year by low growth rates elsewhere.
Most large emerging-market economies are also projected to underperform in 2023. Chinese stimulus measures will not be enough to offset the effects of COVID-19 shutdowns and turmoil in the property sector. Growth in India will be hampered by monetary tightening, while the Russian economy will continue to reflect the economic repercussions of its invasion of Ukraine, and political gridlock in Brazil will weigh on growth there.