Global economic growth is set to decline from a brisk 5.8 percent in 2021 to 3.3 percent in 2022 and 2023. Economic activity faces impediments resulting from higher inflation, which requires tighter monetary policy, as well as episodes of resurging COVID-19 and price disruptions caused by the war in Ukraine.
The outlook varies among large economies. China's economic growth could slow significantly in the next two years as severe COVID-19 lockdowns and a major downturn in the property sector drag on GDP. India's economy is projected to grow the fastest, but its contraction during the pandemic was particularly severe.
The US outlook is less robust than projected in October of last year. Inflation is at its highest level since the 1980s. Although waning fiscal stimulus will remove some demand, consumers have built up savings since the start of the pandemic that will continue to finance spending. To control inflation, the Federal Reserve will need to tighten monetary policy, raising unemployment to around 4.5 percent and increasing the risk of recession.
This PIIE Chart is based on Karen Dynan's blog post, Economic prospects call for high inflation and slowing global growth, and her presentation at the Global Economic Prospects: Spring 2022 event.