The Mastercard Economics Institute’s economic outlook for 2023: What the ‘multi-speed’ global economy means

December 8, 2022 | By Bricklin Dwyer

In 2023, the Mastercard Economics Institute expects to see a multi-speed global economy defined by uneven outcomes, where some countries, companies and individuals are more exposed to the headwinds from high inflation and interest rates than others.

This dynamic is creating a divergence in real (inflation-adjusted) economic growth. For Europe, this means we expect a decline in economic activity, while in the U.S., limited economic growth. At the same time, commodity exporters in the Middle East and some parts of emerging Asia may see moderate growth. With this backdrop in mind, we also see a bifurcation by sector where experiences fare better than goods, given the continued pent-up demand for travel and shifts in consumer preferences.

The Mastercard Economics Institute’s annual “Economic Outlook 2023” draws on a multitude of public and proprietary data sets, including aggregated and anonymized Mastercard switched volumes, as well as models that are intended to estimate economic activity. In the report, we explore four themes that will continue to shape the global economic environment — high interest rates and housing, trading down and shopping around, prices and preferences, and shocks and omnichannel. Our key findings include: 

High rates and housing

After years of a housing boom, higher interest rates are expected to squeeze budgets, shifting the way consumers spend broadly. In major developed countries, we expect housing-related spending as a share of goods to fall an estimated 4.5% over the course of 2023, below pre-pandemic levels. With less desire or ability to spend on the home, consumers could allocate more toward other types of spending.

Trading down and shopping around

Broad spending should remain resilient in the face of inflation, with consumers choosing wallet-friendly brands and chasing the best value. Globally, grocery shoppers made 31% more trips to the store through September 2022 of this year than in 2019 — partially to reduce food waste — while their average spend per visit is roughly 9% lower, our analysis across a 15-country sample shows. But for discretionary retail, which includes categories such as furniture, electronics and apparel, consumers are spending less. The inflation story underpinning these trends varies by market. Consumers in Australia and the U.S. are weathering the inflation headwinds better due to excess savings, a tight labor market and a stronger recovery in credit spending.

Prices and preferences

As food and energy costs eat up a greater share of the consumer budget, lower-income households will feel an especially strong pinch. From 2019 to 2022, we saw discretionary spending — on apparel, jewelry, furniture and electronics, for example — by high-income households grow nearly 2 times as fast as that of lower-income households. However, much of this gap will diminish with the normalization in inflation. The Economics Institute expects inflationary pressure to ease next year, with the average inflation rate of developed economies falling from 7.1% year over year in Q4 2022 to 3.1% year over year in Q4 2023.

Shocks and omnichannel

Businesses with an omnichannel presence are likelier to withstand shocks by meeting customers where they want to shop. Maintaining both an in-store and an online presence has helped firms stay resilient, connect with more customers, broaden brand awareness, diversify product offerings, and provide more flexible and targeted pricing structures. But this can vary significantly based on the store type. Our analysis suggests that having a multichannel presence provided 6-percentage-point lift in retail sector sales through September 2022. Small and large restaurants were saved from losing an additional 31% of sales during the height of lockdowns with their omnichannel presence, according to an analysis of a 12-country sample. Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10% and 26% faster, respectively.


While this is a clearer picture than what we have faced in recent years, the global economy is rarely without unexpected refractions, and our lens will continue to focus on the underlying elements at play.

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Bricklin Dwyer, Chief Economist and Head of Economics Institute, Mastercard Economics Institute

Bricklin Dwyer is Chief Economist and Head of Economics Institute. In this role, he draws on key Mastercard insights – including Mastercard SpendingPulse™ – and other publicly available data with a team of experts to analyze macroeconomic trends. The Mastercard Economics Institute enables the company to have deeper, more meaningful engagement with key customers, partners and policymakers.