Global economy to avoid recession in 2023 but most advanced economies set to face house price fall in response to higher interest rates - PwC

26 Jan 2023

  • Global GDP set to expand by around 1.6% in market exchange rates in 2023, with G7 economies growing by a marginal 0.1% in annual average terms

  • India is expected to be fastest-growing G20 economy (5.4%) followed by China (4.7%) and Indonesia (4.5%) while Ireland (2.3%) and other peripheral economies set to record relatively higher growth rates in the Eurozone

  • UK set to see largest contraction (-0.8%) in G7, alongside Germany (-0.5%) and Italy (-0.4%) while US set to slow to 0.2% but potentially avoid a technical recession. The Eurozone economy will flatline. 

  • Housing market across most advanced economies set to fall or flatline, with Sweden, Australia, New Zealand and Canada facing greatest exposure

The global economy is due to face a slow-down but avoid recession in 2023, as many advanced economies grapple with above-target inflation, energy price pressure and rising interest rates, according to the latest edition of PwC’s Global Economy Watch.

In PwC’s main scenario projections, the UK is set to record the largest contraction (-0.8%) across the G7 closely followed by Germany (-0.5%), Italy (-0.4%) while France may report modest growth of 0.1%. US growth is also expected to slow to 0.2% but will probably avoid a technical recession (defined as two successive quarters of negative growth). 

India is set to see the highest growth (5.4%) across the G20, Indonesia (4.4%) will be the fastest growing Southeast Asian economy and Ireland (2.3%) will record the highest growth in the Eurozone. China’s economy is forecast to expand by 4.7%, although this will be highly dependent on the progress of the re-opening of the country from Covid-19 measures.

Barret Kupelian, senior economist at PwC, says:

“The global outlook for 2023 is of slow growth but not recession, as the real economy adjusts to tighter financial conditions. Many advanced economies, particularly the UK and Eurozone, will continue to be heavily impacted by higher prices of natural gas driving above-target inflation and cost of living pressures.

“Nonetheless, we are increasingly becoming more confident that lower spot and future natural gas prices and the weaker US Dollar, particularly when compared to other advanced economies, is likely to reduce import-led inflation and help limit the damage to economic activity, particularly for large energy-importing economies. If this scenario materialises, it will be good news for businesses and consumers across the board and we could see inflation surprise on the downside and growth surprise on the upside. 

“The big unknown is the uncertainty around China’s growth rate, given the challenges involved in emerging from strict zero-Covid measures. Tourism is expected to rebound across North America and the Middle East this year, with air passenger levels set to return to 85% of pre-pandemic levels. Chinese tourists made up a tenth of tourism globally pre-2020, so a successful re-opening would have a notable economic impact.”

Housing market set to fall 

Across most advanced economies, house prices will fall or flatline. Risks to the housing market—the pace of increase in mortgage interest rates, the level of household debt and the size and duration of fixed-rate mortgages—are higher in markets such as Sweden, Australia, New Zealand and Canada. 

By contrast, risks are lower in peripheral European markets such as Ireland and Spain, where house prices took a more sizeable hit during the 2008/9 crisis and subsequent Eurozone crisis which meant that household debt levels remain relatively low, thus reducing risk.

Jake Finney, economist at PwC says:

“Many advanced economies saw substantial increases in house prices during the pandemic, as buyers took advantage of low interest rates and higher savings accrued during lockdowns. For the countries facing the highest exposure, it is possible that they could see double digit percent falls, reversing most of the pandemic gains. For others the fall is likely to be more modest - but the housing market will be one of most obvious indicators of the new era of higher interest rates globally.”

In addition, PwC expects that crude oil prices will bottom out at around $80 per barrel by the middle of 2023, while half of all electric vehicles on the road globally will be in China by the end of the year. 


Notes to editors:

  1. The full Global Economy Watch: January 2023 report is available to read here. For more information or to request an interview with a PwC economist please contact

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