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
Global Markets Data Calendar

Our view in a nutshell

Japan

  • Japan’s economy will likely resume on a recovery path, after contracting for three consecutive quarters till Q1 2024.
  • While core CPI inflation (less fresh food) will likely decline, it should gradually become stickier accompanied by continued wage increases.
  • The BOJ left policy intact in January but signaled it is gradually becoming more confident in realizing sustainable and stable 2% inflation.
  • The BOJ will likely abandon NIRP and YCC in April 2024, assuming a virtuous cycle between wages and prices.

Asia

  • We see the region entering a sweet spot in early 2024, due to a chip-led export recovery and steady domestic demand.
  • A turn in the tech cycle may improve the outlook for Northeast Asia, but we see India and ASEAN as the medium-term champions.
  • CPI inflation should ease across all economies, but with some divergence: sticky in Singapore and deflation in Thailand.
  • We expect a monetary policy pause through Q1 to give way to rate cuts starting in Q2 2024, led by Indonesia and Thailand.
  • Korea: Despite a worsening domestic economy, an improving chip cycle should delay BOK rate cuts to July 2024 (100bp of cuts in 2024).
  • India: Resilient growth and higher food inflation support extended policy pause, with 100bp of rate cuts from August 2024.
  • Indonesia: The elections provide a short-term boost to growth but political uncertainty could add to BOP pressures.
  • Australia: We expect to narrowly avoid a recession. As inflation eases and unemployment rises, we expect rate cuts from August 2024.

China

  • A larger-than-expected RRR cut indicated policymakers have become increasingly concerned about the ongoing economic dip.
  • We still see drags from tapering pent-up demand, a worsening property sector, slowing external demand and peak 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 may eventually have to act as lender of last resort to save the property sector by completing construction of unfinished homes.

United States

  • Faster disinflation, the Fed’s dovish pivot and a resilient labor market have led to easing financial conditions and robust risk sentiment.
  • We expect the Fed to cut rates by 75bp this year (June, September and December), followed by quarterly rate cuts in 2025.
  • The Fed will likely reduce the pace of balance-sheet rundown in June and cease quantitative tightening (QT) in December.
  • We expect disinflation to continue in the near term, led by used vehicle prices, rent/OER disinflation and muted inflation of medical prices.
  • Job gains will likely continue to moderate, but easier financial conditions and and a dovish Fed limit the risk of a sharp deterioration.
  • Recession risks are likely to linger, and in our view, should be relatively front-loaded. However, contraction is not our base case.

Euro Area

  • We expect a slow recovery in GDP in 2024 with growth of only 0.1% y-o-y, teetering on the edge of recession.
  • We see euro area inflation remaining above target through 2024 with core inflation only decelerating to 2% in H2 2025.
  • We believe the ECB’s hiking cycle is over, with a terminal depo rate of 4%. We expect cuts from June 2024.
  • 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

  • GDP is likely to contract by 0.3pp over two quarters from Q3 2023, as firms and households pull back on spending.
  • Upside risks: excess savings and longer policy lags. Downside risks: the scale of monetary tightening and rise in unemployment.
  • 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 Q3 2024.

For more information read our weekly report here.

Contributor

    Aichi Amemiya

    Aichi Amemiya

    Senior US Economist

    George Buckley

    George Buckley

    Chief UK & Euro Area Economist

    Ting Lu

    Ting Lu

    Chief China Economist

    Kyohei Morita

    Kyohei Morita

    Chief Economist, Japan

    Rob Subbaraman

    Rob Subbaraman

    Head of Global Macro Research

    Sonal Varma

    Sonal Varma

    Chief Economist, India and Asia ex-Japan

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