Twice a year, the OECD, an international organization consisting of mostly developed countries, releases new economic projections across regions and countries. Its most recent report highlights the challenges that still face the global economy. Overall, worldwide economic  output is forecasted to decelerate from 3.1% in 2022 to 2.2% in 2023. These numbers represent significant declines from 2021 when many economies were roaring back from the pandemic and before inflation began surging.

There are two important points to note from these forecasts. First, while growth is expected to slow, few major regions and countries are anticipating
recessions (i.e. negative growth). Even where recessions are expected, the declines will likely be small and not on the scale of 2008 or 2020. This is true even in Europe, which is on the front lines of the war in Ukraine and has been heavily exposed to rising energy prices. So, although growth in the region will be meager, dragged down by countries like Germany, it could also be supported by growth in countries such as France, Spain and Italy.

In contrast, China might experience re-accelerating growth if it begins to ease its Covid policies, allowing its economy and manufacturing activities to fully reopen. This is also true in Japan, which has experienced only modest inflation, unlike most other parts of the world. Other major countries in the region, including Korea and India, are expected to see relatively steady growth. Unsurprisingly, Russia is the outlier and is expected to shrink by 3.9% in 2022 and 5.6% in 2023 due to the heavy toll from its military campaign.

Second, these forecasts also suggest that growth could rebound again in 2024 once the economic shocks of the past year begin to fade. Based on this, nearly all economies are expected to experience positive growth in 2024. While multi-year forecasts should be taken with a grain of salt, they suggest that many economies can eventually bounce back from today’s challenges.

Ultimately, what matters to investors is that, despite ongoing economic challenges, it’s likely that markets have already priced-in much of this information. After all, the inflationary and geopolitical pressures that have driven these trends have been on investors’ radars since the start of the year. In fact, any easing of these pressures could help to improve investment and valuation prospects.