General assessment of the macroeconomic situation

The global economy is facing mounting challenges. Growth has lost momentum, high inflation is proving persistent, confidence has weakened, and uncertainty is high. Russia’s war of aggression against Ukraine has pushed up prices substantially, especially for energy, adding to inflationary pressures at a time when the cost of living was already rising rapidly around the world. Global financial conditions have tightened significantly, amidst the unusually vigorous and widespread steps to raise policy interest rates by central banks in recent months, weighing on interest-sensitive spending and adding to the pressures faced by many emerging-market economies. Labour market conditions generally remain tight, but wage increases have not kept up with price inflation, weakening real incomes despite the actions taken by governments to cushion the impact of higher food and energy prices on households and businesses. Global GDP growth is projected to be 3.1% in 2022, around half the pace seen in 2021 during the rebound from the pandemic, and to slow further to 2.2% in 2023, well below the rate foreseen prior to the war. In 2024, global growth is projected to be 2.7%, helped by initial steps to ease policy interest rates in several countries. Global prospects are also becoming increasingly imbalanced, with the major Asian emerging‑market economies accounting for close to three-quarters of global GDP growth in 2023, reflecting their projected steady expansion and sharp slowdowns in the United States and Europe. Headline consumer price inflation in the major advanced economies is projected to moderate from 6.3% this year to around 4¼ per cent in 2023 and 2½ per cent in 2024 as tighter monetary policy takes effect, demand pressures wane, and transport costs and delivery times normalise, although the pace of decline will vary across countries.