What's on the horizon for the global economy?
Our weekly updated overview highlights the key releases of global economic market data from around the globe and provides an economic outlook for 2023 by region.
- Our Week Ahead podcast explores the main themes that will drive global markets over the coming week
- Our Global Economic Markets Data Calendar shows upcoming events happening over the week
- We provide an outlook overview region by region
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Our view in a nutshell
Japan
- Japan’s recovery will continue towards 2025, albeit with a temporary and shallow contraction in Q4 2023 and Q1 2024.
- While core CPI inflation (less fresh food) will likely fall, it should gradually become stickier, accompanied by continued wage increases.
- The BOJ Governor Ueda said policy management will shift from being ‘behind the curve’ to being ‘data dependent.’
- The BOJ will abandon YCC in Q4 2024, while the abandonment of NIRP will be postponed to 2025 or later.
Asia
- Our base case assumes that the export downturn is bottoming out, and will improve in Q4, reflecting an improved tech cycle.
- We expect investment and consumption demand to weaken on lagged monetary policy effects, high uncertainty and US recession spillovers.
- A turn in the tech cycle may improve the outlook for Northeast Asia, but we see India and ASEAN as the medium-term champions.
- Core disinflation is underway and should sustain, but El Nino and protectionism are upside risks for food prices in the coming months.
- The rate hiking cycle is over. We expect an extended pause this year and rate cuts in Q1 2024 (BOK, RBI and BI).
- Korea: Despite a likely recession in H2 2023, we expect the BOK to begin cutting rates only in Q1 2024 (150bp cuts in 2024).
- India: Resilient growth and higher food inflation support extended policy pause, with 100bp of rate cuts in 2024 from February.
- Indonesia: With weakening terms of trade, small twin deficits should return but still look relatively manageable.
- Australia: We expect to narrowly avoid a recession. As inflation eases and unemployment rises, we expect rate cuts from May 2024.
China
- Amid rising risk of an economic double dip and Beijing’s tepid response to date, we lowered our GDP growth and inflation forecasts.
- Markets may underestimate the negative impact from the property fallout and the worsening geopolitical tensions.
- After two rounds of rate cut and RRR cut, the PBoC may deliver one rate cut in the rest of the year.
- Beijing is likely to redeploy many of the financial tools it used last year to maintain the functioning of local governments.
- While Beijing is very likely to step up policy support in coming months, we believe there will be no fast, cure-all stimulus package.
United States
- A mild recession is likely to begin Q4 2023 led by a downturn in business investment.
- We believe disinflation has begun considering encouraging signs of easing price pressures for core services and housing.
- We believe that the Fed has reached the terminal rate and continuing disinflation will convince them to keep rates on hold.
- Near-term momentum in labor markets will likely give way to gradual cooling.
- Recent data suggest economic momentum remains firm, raising the risk of a soft landing.
Euro Area
- We expect a moderate three quarter recession, from Q3 2023, driven by a sharp fall in investment (-1% of GDP).
- We see euro area inflation falling sharply in the coming months; core especially should remain above target for some time.
- We believe the ECB’s hiking cycle is over, with a terminal depo rate of 4%. We expect cuts only from Q3 2024.
- The ECB began full roll-off of its APP portfolio redemptions in July 2023. We think active sales could begin in Q1 2024.
United Kingdom
- GDP is likely to contract by 0.7pp over three quarters from Q3 2023, as firms and households pull back on spending.
- Lower energy prices and base effects should help cut inflation, though not back to target until beyond the end of 2024.
- We believe the BoE is done with raising rates, leaving Bank Rate at a terminal level of 5.25%. We don’t see cuts until Q4 2024.
- The Bank is expected to step up the pace of quantitative tightening from Q4 2023 to £100bn per year.
For more information read our weekly report here.
Contributor
Aichi Amemiya
Senior US Economist
George Buckley
Chief UK & Euro Area Economist
Ting Lu
Chief China Economist
Kyohei Morita
Chief Economist, Japan
Rob Subbaraman
Head of Global Macro Research
Sonal Varma
Chief Economist, India and Asia ex-Japan
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