special-reports Ratings /ratings/en/research-insights/special-reports/global-economic-outlook-q4-2022 content esgSubNav

Global Economic Outlook:
Q4 2022

Many Routes To The Bottom


S&P Global Ratings’ team of economists, led by Chief Economist Dr. Paul Gruenwald, is responsible for developing the macroeconomic forecasts and risk scenarios used by S&P Global Ratings' analysts during the ratings process, as well as leading key cross-sector and cross-divisional research projects.

Access all economic forecasts >

ON THIS PAGE   Global   U.S.   Eurozone   Asia-Pacific   Emerging Markets   Canada   EMEA Emerging Markets   Latin America


Global Economic Outlook Q4 2022:

Many Routes To The Bottom

    • Rising rates, increased European energy insecurity, and the lingering effects of COVID-19 are hitting growth almost everywhere; Asia-Pacific remains a relative outperformer.

    • As central banks aggressively raise rates to fight inflation, our confidence is waning that they can avoid generating a sharp downturn; indeed, we are now expecting a mild recession in the U.S. The key variable is labor market performance, which has so far remained robust.

    • We have generally lowered our forecasts for GDP growth in 2022 and 2023 and raised our forecasts for inflation; the risks around this baseline remain on the downside.

    • Prospects for a near-term recovery are unclear; while the U.S. faces a classic overheating problem that should resolve itself fairly quickly, Europe's energy reconfiguration will take years to complete, and the timing of China's move away from its stringent zero-COVID policy is anyone's guess (although we are penciling in early 2023).

Read the Full Report


Economic Outlook Asia-Pacific Q4 2022: 

Dealing With Higher Rates

    • China's recovery should remain muted through the first quarter of 2023 amid a largely unchanged COVID-19 stance and weak property sector.

    • Following a solid 2022, Asia-Pacific's growth outside China should soften in 2023 on higher interest rates and weaker external demand.

    • Higher global interest rates will continue to exert pressure on central banks in the form of capital outflows and depreciation.

Read the Full Report


Economic Outlook Canada Q4 2022:

Canadian Growth To Slow On Higher Interest Rates And U.S. Weakness

GDP growth: Headwinds against household consumption and an expected recession in the U.S., Canada's major trading partner, will likely hurt the Canadian economy next year. Geopolitical uncertainties, weakness in the U.S., and the ramifications of inflation and monetary policies at home will keep growth moderate into next year. We now expect growth to slow to 1.1% in 2023 (compared with the 1.9% we projected in our June forecast).

Labor force: The jobs market remains tight as more people return to the labor force. Nonetheless, there have been net job losses in three consecutive months, while job postings continue to decline. We expect the labor market to weaken modestly in response to tighter monetary policy.

Unemployment: The unemployment rate, at 5.4% in August (just below the pre-pandemic level), is expected to rise through early 2024. With economic pressures worsening as the central bank continues tightening the screws and U.S. economic activity weakens, business demand for labor shrinks. We now expect the unemployment rate to climb to 5.9%, on average, in 2023 from 5.3% in 2022.

The BoC: By the end of the year, the central bank will likely raise policy rates an additional cumulative 150 basis points to 3.75%. The bank will keep both monetary tools--rate hikes and quantitative tightening--for as long as excess demand and the tight labor market continue to push prices. We expect the bank to cut rates starting in second-quarter 2023 as inflation begins to moderate. Core inflation, excluding food and fuel, is expected to reach the BoC's target of 2.0% by fourth-quarter 2023.

Read the Full Report


Economic Outlook Emerging Markets Q4 2022:

Further Growth Slowdown Amid Gloomy Global Prospects

Growth: Better-than-expected growth in several emerging market (EM) economies in the first half triggered a small upward revision to our 2022 GDP growth forecast for our sample of EMs, excluding China. However, we expect a weaker second half, and even slower growth in 2023 across most EMs.

Risks: Downside risks remain substantial, especially from the global fallout of the ongoing Russia-Ukraine conflict and the Fed-led tightening of financial conditions.

Inflation: We raised our median consumer price inflation forecast for our sample of 17 EM countries to 5.6% in 2023--1.5 percentage points higher than our June forecasts--emphasizing the sharper hit to consumers' purchasing power and subsequent lower real domestic demand.

Monetary policy: Keeping inflation expectations anchored and protecting capital flows will be top of mind for monetary policymakers. EM central banks have been ahead of their advanced country counterparts in hiking policy rates, and in Latin America are now near the end of their tightening cycles. Elsewhere, core inflation continues to rise, suggesting there is more work to do.

Read the Full Report


Economic Outlook EMEA Emerging Markets Q4 2022:  

Juggling Inflation, Interest Rates, And Growth

    • Economic activity in several key emerging EMEA economies has visibly slowed and we expect worsening geopolitical and financial conditions will weigh on growth through the rest of the year and into early 2023, particularly in emerging Europe.

    • There are some bright spots amid the generally challenging regional economic outlook, including still very favorable terms of trade for energy exporters and Turkey's booming tourism season, which is likely to extend into winter.

    • Fiscal and monetary policy responses will differ as countries balance the need to reduce inflation and protect capital flows amid rising global interest rates, while also facing worsening global and domestic growth prospects.

    • Risks to S&P Global Ratings' forecast are firmly to the downside and include the fallout from ongoing Russia-Ukraine conflict, as well as persistent inflation that could prompt central banks in the EMEA region to hike rates more than we currently expect.

Read the Full Report


Economic Outlook Eurozone Q4 2022:

Crunch Time

A sharp slowdown in eurozone growth is imminent. An unprecedented deterioration in the terms of trade has pushed inflation to record highs and confidence to record lows. As a result, the five consecutive quarters of solid GDP growth as of second-quarter 2022 will give way to two or three quarters of subdued or even lower activity. That's why we now expect the eurozone economy to stagnate next year (0.3% versus 1.9% previously). For this year we are revising upward our growth forecast to 3.1% from 2.6% and lowering our unemployment forecasts.

There are windbreakers, however. Supporting the economy are still accommodative monetary policy, increasing fiscal support in response to the energy crisis, easing supply chain bottlenecks with large remaining production backlogs, and a growing population. What's more, the labor market, with employment at an all-time high, is unusually strong. Risks to this outlook are predominantly on the downside.

Monetary policy will become slightly restrictive by next year. Given strong economic conditions and high inflation, the ECB has front-loaded interest rate hikes. A terminal deposit rate of 2% could be reached by the end of first-quarter 2023. Also important for monetary policy normalization are reductions to the ECB's balance sheet, which we believe will start by the end of 2024.

Read the Full Report


Economic Outlook Latin America Q4 2022:

A Period Of Below-Trend Growth Ahead

    • Most of the major Latin American economies performed better-than-expected in 2022, in many cases growing above-trend because of resilient domestic demand, and an uptick in exports. As a result, we revised our 2022 GDP growth forecast for the region to 2.8%, from 2.0% previously.

    • However, we expect Latin American economies to shift into low-trend growth by the end of this year and into 2023, as more challenging external dynamics weaken exports in the region, and waning confidence takes a toll on domestic demand. We now project Latin America to expand by 0.9% in 2023, compared with our previous 1.8% assumption.

    • Uncertainty over the trajectory of the U.S. economy, with a shallow recession now expected in the first half of 2023, is a key downside risk to our GDP growth forecasts in Latin America.

Read the Full Report

Economic Outlook U.S. Q4 2022:  

Teeter Totter

GDP growth: Our U.S. GDP growth forecast is 1.6% for 2022 and 0.2% for 2023, as the economy falls into a shallow recession in the first half of the year (compared with 1.8% and 1.6%, respectively, in our August economic update).

Labor force: The jobs market is still tight as workers quickly find jobs. The labor force participation rate for prime age female workers (25 to 54 years old) climbed in August to its highest rate since before the pandemic, as COVID-19 vaccines to young children and reopening of schools helped parents return to the workforce, to improve business needs.

Unemployment: We now expect the unemployment rate to reach 4.8% by the end of 2023 and peak at 5.7% by early 2025. It will hold above 5% through 2026.

Inflation: Inflation likely peaked in third-quarter 2022 but will remain high on continued supply-chain disruptions. Core prices, excluding food and fuel, is expected to remain above the Fed's 2.0% target until first-quarter 2024.

The Fed: The Fed is now likely to push rates from zero at the beginning of this year to 400-425 basis points (bps) by early 2023. The Fed will keep monetary policy tight until inflation begins to moderate in second-half 2023. We expect the Fed to cut rates in late 2023 as its soft landing turns into a hard one with prices softening on weak demand. Risk is for more rate hikes this year and the next.

Downside: While our baseline now includes a recession, we can't rule out chances of an even harder landing. As we write this, the Fed has indicated that it will tighten the screws more if needed. A more aggressive Fed would likely mean an even harder landing than in our baseline.

Upside: One upside could be that, as the economy tumbles, demand softens, lowering prices, allowing the Fed to change course to avoid an economic crash. The economic ship re-rights itself and manages to steer toward safer waters.

Read the Full Report