In our latest Global Economic Outlook, we look at the prospects for the world economy in 2023 and 2024. We provide our forecasts for growth, inflation and unemployment for 34 countries and economic areas.
The outlook for the global economy took a positive turn early in 2023: inflationary pressures began to ease and global energy prices returned to levels last seen prior to the invasion of Ukraine. We expect headline inflation to continue falling this year – from 7.4% in 2022 to 5.3% in 2023 – and potentially reach central banks’ targets by 2024.
The labour market remains relatively tight across most countries and we expect unemployment to remain level at 5.2% in 2023. That should provide an important support for households’ incomes and consumer spending, even though real incomes are squeezed.
But despite the resilience of the labour market and the improving inflation conditions, global economic growth is expected to be relatively modest over the next two years. Following GDP growth of 3.1% in 2022, we expect growth of 2.1% this year and 2.6% in 2024.
UK Economic Outlook
In the UK, the likelihood of a recession has fallen, but after GDP growth of 4.0% in 2022, we expect growth of -0.3% in 2023 on the back of a squeeze on household real incomes and the impact of past interest rate increases. Growth will remain weak in 2024 at 0.6%.
Structural issues, including skills shortages, slowing workforce participation, and population ageing, dominate the longer-term risks to the outlook.
KPMG in the UK