Global inflation easing but high interest rates and policy uncertainty take their toll on growth

Deceleration in growth in some of the world's largest economies, coupled with little impetus elsewhere, could see global GDP growth easing slightly

GDP growth forecast to ease slightly


  • Deceleration in growth in some of the world’s largest economies, coupled with little impetus elsewhere, could see global GDP growth easing slightly in 2024.
  • Weaker momentum should help push down inflation, with average world inflation expected to halve by 2025.
  • Monetary tightening cycle is reaching its end, but there could be an increasing divergence in the timing and the extent of easing by central banks.

KPMG Global Economic Outlook – December 2023

A significant uplift in global growth is unlikely in 2024 with no short-term end in sight to geopolitical uncertainty and tight monetary policies, according to the latest KPMG Global Economic Outlook.

Produced by leading economists from KPMG member firms around the world, this year’s report looks at the economic prospects for 37 countries and economic areas in 2024 and 2025, including the potential for the world economy over the next two years.

With global trade plateauing in recent years, driven in part by the pandemic, geopolitical tensions and rising protectionist measures, the KPMG report warns of potentially large output losses from geoeconomic fragmentation over the longer term. The report forecasts global GDP growth of 2.2% in 2024 – down from 2.6% in 2023, with a return to 2.6% growth anticipated in 2025. 

Inflation and supply chain pressures easing

Weaker economic momentum has helped ease supply chain pressures and reduce broader cost pressures, with energy prices dropping significantly from their 2022 peak when Russia invaded Ukraine. Median CPI inflation for the G20 countries fell to 3.9% in October 2023 after peaking at 7.7% in July 2022, and KPMG expects further deceleration in coming months.

The Global Economic Outlook forecasts see world inflation averaging 5.0% in 2024 and 3.9% in 2025, down from an estimated 6.5% in 2023 and 8.0% in 2022. Risks are on the upside, however, as any further shocks to energy prices – or a more persistent domestic inflation in some countries – could derail the relatively smooth return to central banks’ inflation targets next year.

Monetary policy has largely reached the height of the current tightening cycle. However, many central banks are likely to hold on before starting to ease again. The big question at the moment is when interest rates will start falling and how far down they will go. While central banks such as the National Bank of Poland and Banco Central do Brasil have already begun to cut rates, KPMG economists view is that most central banks – including the U.S. Fed and the Bank of England – would not start acting until well into 2024, with rates settling at a significantly higher level in the medium term than during the decade prior to the Covid pandemic.

Weak investment outlook amplified by policy uncertainty

Uncertainty triggered by rising geopolitical tensions is exacerbated by policy uncertainty for countries including the U.S., the UK, India as well as Austria, where 2024 is an important election year. This could see relatively weak business investment in the short term, while there is little room for governments to pick up the slack as public finances have worsened significantly in recent years. Nevertheless, unemployment is likely to remain relatively low – at just below 6% on average globally – providing some support for consumer spending despite the various headwinds. 

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