Global GDP
The growth of global economic activity has been slowed by policy uncertainty, shifting inflation dynamics and tighter credit conditions. In addition, the outlook for external demand remains weak, weighing on commodity exporters and growth in emerging markets.
Gross domestic product (GDP) is the standard measure of the economy’s output. It includes all market transactions in a country, including production by households, businesses and government. It also includes compensation of employees and property taxes. It excludes non-market transactions such as bartering and volunteer or unpaid activities. Economists adjust GDP to account for inflation over time by comparing output in current prices with that in a previous year’s prices. This is known as real GDP.
Inflation is a negative contributor to GDP, because when prices rise, people buy fewer goods and services. It is therefore important to control inflation as part of the growth strategy of a country. A key tool in this is cutting interest rates, which will increase the money supply and thus stimulate demand by lowering borrowing costs.
Our forecast of global GDP shows that, in our baseline scenario, global growth slows from 3.4% in 2022 to 2.5% in 2023. This is due to the drop in global trade following the COVID-19 pandemic, rising oil prices and tighter credit conditions. Meanwhile, in an alternative scenario with further financial sector stress and heightened policy uncertainty, global GDP growth slows to 2.7 percent. Global headline inflation is expected to fall sharply, but underlying (core) inflation will continue to decline more slowly.