Global Scenarios Service: Stagflation

The global economic outlook has continued to deteriorate.

Since our previous Global Scenarios Service, we have revised down our baseline forecast for world GDP. The risk that the global economy will slip into recession next year has risen and so has the risk of a protracted period of stagflation.

While we still see global inflation returning to pre-pandemic rates by late 2023, we have raised our inflation forecasts for the next year. As well as dampening consumer spending, higher inflation will add to concerns about a loss of monetary policy credibility. Indeed, central bank rhetoric has recently been very focused on inflation risks with little apparent attention to growth.

Businesses see the resultant rapid central bank tightening as an increasingly important threat to the global economy, adding to concerns over war-related energy market disruption.

To explore the scenarios quantifying key risks to the global economy this quarter, download the executive summary of the report.