Global growth outlook for 2023 weakens

By James Langton | December 5, 2022 | Last updated on December 5, 2022
3 min read
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Amid the ongoing fight against inflation and the continued turmoil in China’s property market, forecasts for global growth in 2023 are getting gloomier, says Fitch Ratings.

In a new report, the rating agency said it now expects world GDP growth of just 1.4% next year, down from 1.7% in its previous forecast.

“Taming inflation is proving to be harder than expected as price pressures broaden and become more entrenched. Central bankers are having to take the gloves off. That won’t be good for growth,” said Brian Coulton, chief economist at Fitch, in a release.

Fitch also revised GDP forecasts lower in various markets, including the U.S., where it now sees growth of just 0.2%, down from its previous call of 0.5%.

The weaker forecast for the U.S. — Canada’s main trading partner — also translates into a weaker call for Canadian GDP in 2023. Fitch now expects 0.6% growth next year, down from an earlier forecast of 0.8%.

At the same time, the rating agency boosted its forecast for this year to 3.5%, an increase of 0.3 percentage points, thanks to stronger-than-expected third quarter results “as a rise in commodity exports more than offset a contraction in domestic demand.”

However, looking ahead to next year, Fitch expects exports to suffer as the U.S. faces recession.

“On the domestic front, the effects of high inflation, tighter financial conditions and the weakening housing market will weigh on household spending and investment,” it said about Canada.

As a result, Canada’s jobless rate is now expected to rise to 6.1% in 2023 and 2024, Fitch noted.

Inflation is expected to come in at 6.8% for 2022, and to drop steadily in 2023 to 3% by the end of next year.

“This strengthens our view that the [Bank of Canada], which raised its policy interest rate by 50 basis points to 3.75% in late October, is coming to the end of its tightening cycle,” Fitch said, adding that it expects a final 25 bps rate hike in December.

Globally, headline inflation is expected to fall significantly in 2023 amid weaker food and energy prices. “But core inflation pressures are expected to be more persistent,” it said.

“China’s economic slowdown has eased pressure on global commodity prices, but the country is a huge net supplier of goods and pandemic-related disruptions to exports could hit global manufacturing supply chains,” it said.

However, it also noted that, “the recent easing in global supply-chain tensions could provide a bigger boost to world GDP than we anticipate.”

For now, Fitch cut its forecast for GDP growth in China next year to 4.1% from 4.5%.

“China’s 2022 growth forecast remains at 2.8% as the surge in Covid-19 cases weighs on activity in the near term,” it said.

Downside risks to the global forecast include the threat of policy mistakes, as governments aim to cushion the effects of high inflation on households, even as central banks seek to curb inflation with higher interest rates.

“The impact of monetary tightening on the economy is already visible — particularly in housing markets — but broader effects on demand and job markets will become more apparent over time,” it said.

“Hidden leverage in parts of the non-bank financial sector — as seen in the recent U.K. gilts crisis — could also be a wider source of risk as real interest rates rise,” it added.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.