No global economy recession: S&P Global
Despite slight recessions in Europe and North America, leading financial news, research, analytics and industry data provider S&P Global Market Intelligence said on Wednesday that the global economy will avoid a recession.
In an emailed report, S&P Global said that “an acceleration in mainland China’s economy, continued development in Asia Pacific, the Middle East, and Africa will boost global GDP by 1.9 percent in 2023 and monetary tightening will cool inflation allowing interest rates to retreat and global growth to pick up to a 3.0 percent pace in 2024 and 2025”
Asia Pacific outlook
S&P Global mentioned that mainland China’s reopening “will lift” the global economy.
“After slowing from 8.4 percent in 2021 to 3.0 percent in 2022, real GDP growth is forecast to pick up to 5.0 percent in 2023 and 5.8 percent in 2024 before resuming a long-term slowdown,” the US think tank said.
While Covid-19 outbreaks appear to have peaked in several areas sooner than everyone anticipated, S&P Global said mobility is recovering, and economic activity is accelerating from weak levels in the closing months of 2022.
‘An acceleration in China’s economy, continued development in Asia Pacific, the Middle East, and Africa will boost global GDP by 1.9 percent in 2023 and monetary tightening will cool inflation allowing interest rates to retreat and global growth to pick up to a 3.0 percent pace in 2024 and 2025.’
“Although consumer confidence remains fragile, there is potential for a consumer-led rebound given that households raised their saving rates during the pandemic,” S&P Global said.
It added that government policy is now focused on supporting economic growth, likely through credit policies, infrastructure investments, relaxation of property sector restrictions, and an easing of regulations on technology companies.
S&P Global also said that trading partners in Asia-Pacific and beyond will benefit from recoveries in Chinese industrial production and tourism.
Progress in inflation reduction
However, S&P Global mentioned that substantial progress in reducing inflation is anticipated in 2023.
With a further deceleration led by goods prices, it expects global inflation to subside to 4.5 percent year-on-year in June and 3.6 percent in December 2023.
“Many of the forces that fueled inflation have reversed, including lockdowns and supply disruptions during the Covid-19 pandemic, extraordinary fiscal and monetary stimuli, and shifts in the composition of consumer spending,” S&P Global said.
It added that monetary tightening, cooling demand, and supply chain resilience are driving disinflation.
The financial research, news and industry data provider mentioned that declines in industrial commodity prices are now moving downstream to intermediate and finished goods prices.
“While most of the industrial materials price correction is behind us, we expect prices to drift lower in 2023 and 2024,” S&P Global said.
It added that the retreat in agricultural commodity prices is proceeding more gradually but should gain momentum in the second half of 2023, bringing relief to consumers.
Meanwhile, the S&P Global mentioned that wage acceleration poses an upside risk to the inflation outlook.
“Unemployment rates in North America and Europe are expected to rise in 2023, slowly alleviating wage pressures. However, the legacy of the Covid-19 pandemic and retirements from an aging workforce could keep labor markets relatively tight in the major economies,” S&P Global said.
“In the United States, where the jobless rate is projected to rise from 3.5 percent in December 2022 to 5.1 percent in late 2023, elevated job openings imply that labor markets are much tighter than indicated by the unemployment rate,” it added.
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