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 key themes driving global markets next 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 economy will likely remain on a recovery path, exceeding potential after contracting in Q1 2024.
- This year’s shunto wage hikes are improving materially higher than last year's, increasing the stickiness of inflation through 2025.
- NIRP and YCC were scrapped in March, leading the BOJ to a state where there is no specific forward guidance.
- We expect the BOJ to implement an additional rate hike in October 2024, while inflation increases stickiness.
Asia
- We expect GDP growth to gradually improve in 2024, due to a sustained goods cycle upturn and steady domestic demand.
- Growth divergences exist: Taiwan, India and Singapore are likely to outperform, while China and Thailand could disappoint.
- Core disinflation should continue, but headline inflation faces near-term risks from higher oil prices, and weaker local currencies.
- We expect BOT to lead the easing cycle in Asia (starting June). A hawkish Fed and higher oil prices risk delayed rate cuts.
- Korea: We expect the BOK to start cutting rates in July 2024 (100bp of cuts in 2024) to support the domestic economy.
- India: Resilient growth and higher food inflation support extended policy pause, with 100bp of rate cuts from August 2024.
- Indonesia: Populist measures of the incoming government raise fiscal risks while current account deficits continue to widen.
- Australia: We expect to narrowly avoid a recession. As inflation eases and unemployment rises, we expect rate cuts from August.
China
- Much more stimulus is needed to reach the ambitious “around 5%” growth target.
- We see drags from pent-up demand, the property sector, a local government debt crackdown and investment in “green” sectors.
- The highest hurdle of a real recovery is the large scale of pre-sold but unfinished homes in low-tier cities.
- Beijing is getting close to a real solution but is still not there yet.
- Beijing should step up central government spending and encourage regions with healthy balance sheets to increase spending as well.
- Beijing may eventually have to act as lender of last resort to save the property sector by completing construction of unfinished homes.
United States
- A bumpy disinflation process, resilient labor markets, and easing financial conditions are likely to delay Fed rate cuts.
- We expect the Fed to cut rates by 50bp this year (July and December), followed by quarterly rate cuts in 2025.
- We expect an announced reduction in the pace of treasury QT to $30bn/mo in May, effective June, and an end to QT in December.
- Disinflation should resume. Last mile issues remain from elevated wage growth, less goods disinflation, and sticky rent/OER.
- Job gains will likely continue to moderate, but there are few signs of labor-market stress or widespread layoffs.
- Risks of inflation reacceleration and a higher neutral rate could lead to a more hawkish Fed in 2024 and 2025.
Euro Area
- We expect a slow recovery in GDP in 2024 with growth of 0.1% q-o-q in H1 recovering to 0.3% q-o-q by year-end.
- We see euro area core inflation still above target through 2024-2025 but with services inflation starting to slow from elevated rates.
- We forecast 100bp of ECB rate cuts this year (25bp in June, July, September, December) and 25bp in both March and June next year.
- The ECB began full roll-off of its APP portfolio redemptions in July 2023. PEPP tapering is expected to begin in July 2024.
United Kingdom
- There was a short, modest recession in H2 2023. We expect a slow recovery in GDP in 2024 (rates between 0% and 0.2% q-o-q).
- Upside risks: low unemployment, strengthening surveys. Downside risks: past monetary tightening and below-average confidence.
- Lower energy prices, base effects and slowing momentum should help pull inflation down, though service prices are sticky.
- We stick with August for the first cut but thereafter see quarterly cuts to a terminal rate of 3.5% in 2026.
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
Euben Paracuelles
Southeast Asia Economist
David Seif
Chief Economist for Developed Markets
Rob Subbaraman
Head of Global Macro Research
Sonal Varma
Chief Economist, India and Asia ex-Japan
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