WASHINGTON, June 10 – Heightened trade tensions and rising interest rates have depressed global growth. This year, global GDP growth is projected to slow to its lowest rate since 2008 outside of outright global recessions, and the pace is expected to remain tepid through 2027. In fact, our latest Global Economic Prospects report finds that growth forecasts have been cut in nearly 70 percent of economies.
This is largely due to rising policy uncertainty, financial tightening and reversals in the recovery from the COVID-19 pandemic. However, the report argues that growth could be revived quickly with an easing in trade frictions, reduced uncertainty and lower interest rates.
The report’s headline is that “An opportunity for a global reset.” It suggests that “international discord has upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after World War II.” It calls for renewed global cooperation, restored fiscal discipline and a relentless focus on job creation.
Global GDP measures the value of all final goods and services produced in a country during an accounting period. The component parts are C (consumption), I (investment) and G (government spending). X (exports) is added to account for the contribution to GDP from goods and services produced for other countries.
The US and China continue to dominate the nominal GDP rankings, but their lead is narrowing on a purchasing power parity basis. Investors watch GDP figures to get a sense of a country’s strength and the potential for future growth.