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 the rest of 2022 by region.
- In our Week Ahead podcast we are discussing the main themes that will drive Global markets.
- Our updated calendar identifies the top events that should be on your radar this week.
- We also provide an outlook overview region by region for the rest of the year.
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Our view in a nutshell
Japan
- We expect growth to accelerate as the pandemic recedes, but the Ukrainian conflict could be a drag on economic activity.
- Elevated international commodity prices will make core inflation exceed the 2% threshold, at least temporarily.
- We do not expect any changes in monetary policy, as the BOJ is unlikely to judge inflation over 2% as sustainable.
- The key risk to our view is economic downturn in overseas economies, caused by tightening financial conditions, and stagflation.
Asia
- We expect an export downturn from mid-2022; reopening and still-loose monetary policy are near-term growth offsets.
- Downside risks to Asia’s growth are rising due to the Russia-Ukraine war, China lockdowns and tighter financial conditions.
- Higher commodity prices should benefit Malaysia and Indonesia, but Thailand, India and the Philippines are relative losers.
- CPI inflation is likely to rise further. DM Asia inflation is broad-based; in EM Asia, higher food and energy prices pose more of a risk.
- Fiscal policy will be the first line of defense against supply-side inflation, while monetary policy responds to second-round effects.
- Higher inflation should trigger frontloaded and faster policy normalisation across Asia, with unchanged rates only likely in Thailand this year.
- Korea: We expect slowing economic growth to limit the BOK’s hawkish stance, despite its heightened concerns over inflation.
- India: Inflation above RBI forecasts should prompt frontloaded hikes: 50bp in June, 35bp in August and 25bp in each of Oct/Dec/Feb/Apr.
- Indonesia: A strong terms-of-trade boost helps offset risks to external balances from BI’s debt monetization, despite rising inflation.
- Australia: Strong growth momentum and intensifying inflation pressures suggest a series of RBA rate hikes.
China
- China’s economy faces the worst lockdown since the first wave, a downward property sector spiral and slowing exports.
- The risk of a recession is on the rise, posing rising challenges to Beijing’s “~5.5%” GDP growth target.
- We expect Beijing to step up policy easing measures, although the policy space could be quite limited.
- The likelihood of Beijing relaxing its ZCS policy before March 2023 is small, and most major property curbs will remain in place.
United States
- Excess consumer savings and inventory rebuilding should support growth, but we expect a notable deceleration through 2024.
- We expect additional hikes of 75bp in June and July and 25bp in Sep, Nov and Dec.
- The Fed will likely raise rates three times in 2023, by 25bp each, to a terminal rate of 3.75-4.00%, followed by rate cuts in 2024.
- We expect strong near-term wage growth and an unemployment rate at 3.3% by end-2022 before an increase to 3.9% in 2023.
- Inflation will likely remain elevated before moderating more notably in 2023; we see balanced risk around our forecast.
- Amid inflation concern and slowing growth, we expect a return to divided government after the November midterms.
- Notable risks include tightening financial conditions, new SARS-CoV-2 variants, geopolitics and unanchored inflation expectations.
Europe
- The euro area is highly exposed to the Russia/Ukraine conflict, with clear downside risks to growth and upside to inflation.
- Base effects, policy and global price pressures to keep European inflation well-above target for longer than previously thought.
- We expect APP to end in July, following which we expect quarter point rate hikes from September 2022.
- A rotation towards services spending in the UK should be positive for growth, but Ukraine, China and high inflation are key risks.
- We see UK inflation peaking in spring 2022, but further energy price rises mean a further similar peak in the autumn.
- We see 25bp BoE rate hikes in June, August and November this year and February next, for a terminal rate of 1.75%.
For more information read our weekly report here
Contributor
Aichi Amemiya
US Economist
George Buckley
Chief UK & Euro Area Economist
Ting Lu
Chief China Economist
Takashi Miwa
Chief Japan Economist
Rob Subbaraman
Head of Global Macro Research
Sonal Varma
Chief Economist, India and Asia ex-Japan
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