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
Listen to us on
Our view in a nutshell
Japan
- Fast wage growth and the reopening of economic activity in Japan and China should keep Japan on a recovery path.
- If sustainability of wage growth is confirmed in the 2024 shunto, price momentum towards 2% inflation should also be more visible.
- The BOJ under new governor Ueda will likely move to tweak YCC policy in June 2023.
- While financial turmoil in the US and Europe is a concern for the BOJ, monetary policy will not derail, in our view.
Asia
- We expect weaker growth in H1 2023, due to a deeper export and industrial downturn and an inventory destocking cycle.
- Our base case assumes a better H2, reflecting improved tech demand and some spillover effects from better China growth.
- Risks are rising that this rebound may not sustain, due to weaker China growth next year and US-led tight financial conditions.
- A turn in the tech cycle may improve the outlook for Northeast Asia, but we see India and ASEAN as the medium-term champions.
- Faster disinflation is still likely from Q2 2023, amid low wages and aided by lower commodity prices and weak growth.
- With the rate hiking cycle largely over (except BSP, BOT), we expect central banks to pause for now, with easing from late 2023.
- Korea: Falling house prices will likely push the economy into recession, leading the BOK to start easing in August (75bp cuts in 2023).
- India: As growth and inflation moderate, we expect a policy pause followed by 50bp of rate cuts to 6.00% by end-2023.
- Indonesia: With weakening terms of trade, small twin deficits should return but be relatively manageable.
- Australia: We expect a slide into recession, as rate hikes bite. As inflation cools, we forecast rate cuts in Q1 2024.
China
- We raised our 2023 growth forecast, thanks to the rapid transition to herd immunity and the release of pent-up demand.
- However, we believe markets need to exercise caution, as pent-up demand could be limited to in-person services.
- Payback from auto stimulus, contracting exports and long-term property issues could also represent challenges to the recovery.
- Inflation is not a major worry, and Beijing’s policy stance is likely to remain accommodative.
- Once the economy recovers, the risk of the policy pendulum swinging back later this year should not be underestimated.
United States
- We believe the federal funds rate has reached its terminal rate due to stress in the banking sector.
- A recession is likely to begin Q3 2023, with risk of an earlier onset, dependent upon on how banking sector stress evolves.
- Rate cuts should begin in March 2024, with risk of earlier cuts if a recession and disinflation occursooner than we expect.
- The labor market should begin weakening in Q3 2023, with a 5.4% unemployment rate by end-2024.
- Inflation should moderate over 2023, with risks balanced, given elevated wage inflation and headwinds to bank lending.
- High inflation and divided government will likely prevent policy support from fiscal authorities.
Euro Area
- The euro area is highly exposed to past energy price rises, so we see a recession taking 0.7% off GDP by end-2023.
- While euro area inflation is likely to fall sharply this year, it should remain well above target for some time.
- We see two 50bp hikes in May, June and one 25bp hike in July, bringing us to a 4.25% peak and cuts from Q4 2024.
- We expect full APP portfolio redemption roll-off from July 2023, after on average €15bn per month from March to June 2023.
United Kingdom
- The UK is less exposed to Russia/Ukraine than the euro area, but still we see a mild recession as likely.
- Fiscal support and lower energy prices should help cut inflation this year, though not back to target until 2024.
- After the BoE slowed hiking to 25bp in March, we think peak rates have been reached and see rate cuts next year.
- During 2023, we expect the BoE to allow c. £35bn of its balance sheet to roll off, and for it to actively sell £40bn of gilts.
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
Disclaimer
This content has been prepared by Nomura solely for information purposes, and is not an offer to buy or sell or provide (as the case may be) or a solicitation of an offer to buy or sell or enter into any agreement with respect to any security, product, service (including but not limited to investment advisory services) or investment. The opinions expressed in the content do not constitute investment advice and independent advice should be sought where appropriate.The content contains general information only and does not take into account the individual objectives, financial situation or needs of a person. All information, opinions and estimates expressed in the content are current as of the date of publication, are subject to change without notice, and may become outdated over time. To the extent that any materials or investment services on or referred to in the content are construed to be regulated activities under the local laws of any jurisdiction and are made available to persons resident in such jurisdiction, they shall only be made available through appropriately licenced Nomura entities in that jurisdiction or otherwise through Nomura entities that are exempt from applicable licensing and regulatory requirements in that jurisdiction. For more information please go to https://www.nomuraholdings.com/policy/terms.html.