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Global Economic Outlook: Q4 2023

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The global economy has continued to show unexpected resilience in the second half of 2023 despite elevated inflation and restrictive monetary policy in most economies. In large part, this has been the result of surprising strength of the US economy, driven by robust consumer spending, low unemployment and high services sector activity.

Yet, in 2024, key pillars of global growth will weaken as high interest rates combined with persistent price pressures will eventually take a toll on economic activity. Hence, in addition to ongoing weakness in global manufacturing, services sector demand and labour markets will soften as well.



In Euromonitor International’s Q4 2023 baseline forecast, the global real GDP forecast for 2023 further increased to 2.8% (2.6% in Q3). For 2024, however, global growth expectations have declined and are now lower than for 2023, at 2.7% (2.9% in Q3), with an increasingly diverging trend between advanced and emerging economies. Global inflation is expected to decelerate to 6.9% in 2023 and to 4.9% in 2024.

Advanced economies will slow due to the growing impact of high interest rates in 2024

The real GDP growth projection for advanced economies in 2023 was revised upwards in Euromonitor International’s Q4 2023 baseline forecast to 1.4% (1.0% in Q3).

Labour market strength and slowing inflation contributed to resilient consumer spending, primarily in services, with better-than-expected performances especially in the US, the UK and Japan

Source: Euromonitor International

On the downside, this means the impact of high interest rates on businesses and consumers will be particularly pronounced in 2024, resulting in a slightly weaker outlook than previously expected.

The US economy has maintained surprising strength going into Q4 2023, resulting in a significant upward revision of its real GDP growth outlook for 2023 to 2.0% (1.2% in Q3). Ongoing labour market resilience and consumption have reduced the likelihood of a recession in the near term. Yet, for 2024, the US economy faces a notably weaker economic outlook, with 0.8% growth expected. This is due to consumer spending slowing in view of still elevated inflation, high interest rates – potentially for a prolonged period – a gradually softening labour market and a weakening global economic backdrop.

In contrast to the US, the Eurozone economy has remained weak throughout 2023, with growth in the Q4 2023 forecast expected at 0.7% (0.6% in Q3). Elevated inflation, tighter financing conditions and weak foreign demand have continued to weigh on business and consumer confidence. Furthermore, manufacturing has been particularly weak, therefore exacerbating the 2023 outlook for Germany to -0.3% growth (-0.2% in Q3). In 2024, continued labour market strength, increasing real wages and recovering foreign demand will provide mild growth impulses for the Eurozone, though weaker than previously expected, leading to growth at 1.0% (1.2% in Q3).GDP Baseline forecast

Emerging economies in Asia Pacific will remain the global growth engine

Emerging and developing economies are expected to see stable growth at 4.0% in 2023 and 2024, driven by accelerating domestic activity and strengthened resilience. With advanced economies slowing in 2024, the diverging trend between both groups of economies will further widen, resulting in an increasing share of global GDP for emerging and developing countries.

China’s economic outlook deteriorated in the Q4 2023 forecast with real GDP growth expected at 5.0% in 2023 (5.3% in Q3) and 4.7% in 2024 (4.8% in Q3)

Source: Euromonitor International

Although China remains a key contributor to global growth, its economy has continued to perform below potential in the second half of 2023 in view of weak consumption and exports. This is expected to continue in 2024 due to lingering risks in the context of China’s unresolved real estate sector crisis, subdued global demand for manufactured goods as well as low business and consumer confidence.

On the upside, the Asia Pacific region will remain the primary source of global growth, fuelled by growing consumption and investment. This is driven, in particular, by the accelerating momentum in 2024 in Vietnam (6.0%), the Philippines (5.7%) and Indonesia (5.1%), plus India, the fastest growing major economy in 2024 at an expected 6.1%. Moreover, the Gulf economies will also significantly exceed global growth in 2024, led by Saudi Arabia (3.7%) and the United Arab Emirates (3.0%).

Inflation will see notable decline in 2024 as economic activity slows further

Global inflation is expected to decelerate to 6.9% in 2023 in the Q4 2023 forecast (7.0% in Q3). The decline in inflation is primarily due to the fall in commodity prices, especially energy, and, to some extent, food prices.

In 2024, global inflation will decline notably to 4.9% as high interest rates and tighter credit conditions will increasingly affect economic activity and reduce inflationary demand pressures

Source: Euromonitor International

However, some price pressures, especially within core inflation, will persist longer than previously expected, resulting in an upward revision from 4.6% in Q3.

Advanced economies will see a faster decline of inflation in 2024 compared to developing economies, in part due to more effective transmission of monetary policy. Moreover, higher vulnerability among developing economies to commodity price shocks, especially food inflation and exchange rate shifts, create persistent price pressures.Global Consumer Price Inflation Baseline Forecast

Commodity Price Hike scenario becomes more likely as geopolitical tensions rise

The global economy faces a new economic reality following the COVID-19 pandemic and the war in Ukraine. This reality is characterised by unusually high uncertainty and a volatile high-risk environment that has broadened the range of plausible outcomes, thereby making scenario planning increasingly vital.

With the outbreak of the Israel-Hamas war in October 2023, the global economy faces an additional geopolitical event with potentially major implications for global energy markets should it escalate.Global Real GDP Growth Forecasts: Baseline and Scenario Forecasts

Euromonitor International’s Commodity Price Hike scenario captures the impact of permanently rising commodity prices on the global economy, including prices for energy, food and metals. This could be the result of geopolitical tensions, that could involve major oil exporters, with implications for supply, global inflation and growth.

In the Commodity Price Hike scenario, global real GDP growth slows to 2.5% in 2023, 2.1% in 2024 and 2.8% in 2025. At the same time, global inflation resurges to 8.6% in 2023 and 6.6% in 2024 and remains elevated in 2025 at 3.7%.

Get additional insights in our report extract. The comprehensive global economic outlook in Q4 2023 and the impacts of different macroeconomic scenarios is available in our full report, Global Economic Forecasts: Q4 2023.

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