News “Global economic growth is unlikely to exceed 2 percent this year.” Last Minute UK, Russia headlines and events
According to a Reuters poll of economists, global economic growth is forecast to barely exceed 2 percent this year. Contrary to the optimism in the markets since the beginning of the year, economists said that the bigger risk is the possibility of a further reduction in their forecasts.
Falling energy prices, slowing inflation, which has reached its highest level in many countries, an unexpectedly strong eurozone economy and the reopening of the Chinese economy have led traders to say that the downturn will be more moderate.
This is despite a higher risk that central banks will keep interest rates higher rather than lower, as the country-wide Morgan Stanley Capital International (MSCI) equity index rose almost 20 percent from an October low to a five-year closing high. years old. months yesterday brought with them.
The MSCI indices were originally developed as international equity indices in 1968 to measure the performance of global capital in markets outside the US.
But economists tend to be much less optimistic. In an October 2022 survey, growth forecasts were cut from 2.3 percent for this year and 3 percent for next year to 2.1 percent and 2.8 percent, respectively.
Some notable updates made by banks in recent weeks have also failed to dispel economists’ pessimism.
However, some of Wall Street’s biggest names are discouraged by expectations that the US economy will make it through 2023 without a recession.
The growth forecast for 2023 is well behind the International Monetary Fund’s (IMF) forecast of 2.7 percent, which was released in October and will be updated next week. The latest Reuters study, covering 45 countries with more than 500 economists, was conducted from 5 to 25 January.
More than two-thirds of those polled, or 130 out of 195, said the bigger risk to growth prospects worldwide is that it will be slower than they currently expect.
Much will depend on how successful the world’s leading central banks are as a result of aggressive interest rate hikes that have yet to end. It could be a year or more before the full effect of the rate hike on the economy is felt.
“The market continues to operate in a dream scenario where inflation peaks and then plummets but does not overeat,” market strategists at Rabobank said, citing relatively good news from data released earlier this year.
“However, the range of scenarios ahead is indeed wide, and yet the market seems to have agreed to a happy average that seems the least likely to occur,” the strategists added.
Gross domestic product growth projections for 2023 for more than 80 percent of the countries participating in the study also declined from the October study.
Inflation forecasts for this year in about 80 percent of the countries surveyed, or 35 of the 45 countries, are up from the October survey. This shows that global central banks tend to pursue tighter monetary policy for a long time.
At the same time, the relatively low unemployment rate was not expected to rise significantly.
This suggests that it may be premature to speculate on lower interest rates as six of the eight major central banks are expected to miss their inflation targets this year.
Nearly all major central banks were expected to keep interest rates stable through the end of this year, in contrast to rate futures that are expected to ease in the fourth quarter.
The European Central Bank (ECB), the US Federal Reserve (Fed) and the Bank of England (BOE) were expected to raise rates at their next two policy meetings and then keep them flat.
The ECB was expected to raise rates by 50 basis points and the Fed by 25 basis points.
The BoE is forecast to raise bank rates by 50 basis points to 4 percent on February 2, followed by a quarter-point hike in March before being suspended.
“We see good reason to believe that the global economy is in for a difficult year,” Citigroup economists said.
“High inflation and tight monetary policy are likely to hurt the outlook and we would not be surprised to see global financial conditions tighten again in the coming months,” he said.
When asked to rate the biggest threat to global economic growth in 2023, more than 85 percent of economists, 171 out of 196, were almost evenly split between a 90 percent monetary tightening and 81 persistently high inflation.
15 economists pointed to the Russian-Ukrainian war, 8 to an asset price correction, one to the resurgence of COVID-19, and one to a weaker-than-expected labor market.
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