How have GDP forecasts been revised since the beginning of the year?

The publication of our Meta Forecast report for November 2022 is a good opportunity to reflect on the diverging economic fortunes of the world’s largest economies.

In the USA, economic perspectives have registered a steady degradation through 2022. Our November GDP forecast for 2022 (1.9%) is substantially lower than our January forecast (3.6%). This is of course connected to the acceleration of inflation, which penalized consumer demand and led to a rapid tightening of monetary policy, weighing on investment. USA GDP growth for 2022 (1.9%) is expected to be lower than in the eurozone (3.3%), which owes to the quicker economic recovery in the USA following Covid-19, rather than to weaker economic fundamentals.

In the Euro area, despite the accumulation of negative headlines and the tense geopolitical situation, the most striking feature of our forecast may be how well GDP growth resisted to the succession of shocks in 2022. Indeed, our November GDP forecast for 2022 (3.3%) is barely lower than the one we made in January (3.6%).

This positive observation needs to be qualified in two ways:

• In the Euro area, much of GDP growth for 2022 can be seen as a delayed catch-up effect following the Covid-19 shock. On an annual average basis, 2021 GDP level in the eurozone was 1% lower than 2019, leaving a lot of room for catch-up (unlike in he USA where it was already 3% higher in 2021 compared to 2019).
• Many of the expected shocks connected to the geopolitical situation and the declining global demand have yet to clearly materialize in GDP data, the energy crisis first among them. This is why we forecast a sharp slowdown for 2023 (+0.8%).

In China, GDP growth is expected to be 3.6%, its lowest level since 1978 (excluding the Covid-19 crisis in 2020). This is markedly inferior to the official GDP growth target of “around 5.5%”. The continued enforcement of China’s “zero-covid” policy throughout the year, along with a severe property downturn, penalized economic activity. The growth acceleration we forecast in 2023 (+5,4%) is itself subject to particularly high uncertainty and will depend on the policy path chosen by the Chinese government, regarding both Covid-19 and the real estate sector.

Across all 3 areas, the uncertainty for surrounding our 2022 growth forecast is fairly small as we are approaching the end of the year. For 2023, uncertainty is very large and downwards-oriented, reflecting the risk of a sharper global economic slowdown.

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