A darker economic outlook became increasingly evident after the summer and the global economy is now expected to slow considerably next year. High inflation proved to be more persistent than expected and is sweeping large parts of the world.
The slowdown next year will be more pronounced in developed economies, particularly in North America and Europe. In the emerging economies, GDP growth will take a slightly different trajectory. China will be entering an economic downturn already this year but is expected to recover in 2023, which contributes positively to global growth.
The surging inflation has prompted central banks to rapidly tighten monetary policy to safeguard confidence in inflation targets, but this comes at the cost of lower growth. Households' purchasing power is eroded when wages do not rise at the same pace as inflation. Meanwhile, companies' investments are dampened when uncertainty around price developments is high and when interest rates rise.
The global economy is therefore expected to grow by only 1.7 per cent next year. However, the slowdown is considered to be short-lived. This forecast rests on the assumption that inflation will fall back next year and, in some cases, drop below the targets of central banks in early 2024.
Explore the full analysis in this year's second edition of Global Economic Outlook, which features a special section on China's economic development.
