The world economy is to grow a bit faster in 2023 surpassing the projections made by Fitch Ratings in its June Global Economic Outlook (GEO). However, the ongoing downturn in China’s real estate sector and the implementation of monetary tightening policies in the US and Europe are emerging as substantial influencers, potentially overshadowing the prospects of global economic advancement.
Fitch Ratings has adjusted its global growth forecast for 2023, elevating it by 0.1pp to 2.5%. This adjustment mirrors the unexpected economic resilience observed in the US, Japan, and emerging markets, excluding China. The growth forecasts for the US and Japan have been elevated to 2.0%, and emerging markets, excluding China, have seen a rise to 3.4%. These enhancements counterbalance the reductions in growth forecasts for China and the Eurozone, which now stand at 4.8% and 0.6%, respectively.
Contrastingly, the global growth outlook for 2024 has been revised downwards by 0.2pp to 1.9%, reflecting widespread alterations in economic predictions. The US, Eurozone, China, and other emerging markets have all experienced cuts in their growth forecasts, highlighting the multifaceted challenges impacting economic landscapes globally.
China’s housing market continues to experience instability, with new sales anticipated to decline by approximately 20% this year. The housing sector, representing a significant portion of Chinese GDP, exerts substantial impacts on the broader economy. The policy relaxations introduced have been relatively inconsequential, and the demand in the export sector is witnessing a decline.
The US, despite the tightening measures by the Federal Reserve, continues to exhibit rapid consumption growth, fueled by the drawdown of Covid-19 pandemic savings and substantial growth in household income. However, the slowing labor demand and the impending mild recession in 1H24 signal the evolving economic conditions in the country.
The Eurozone is grappling with a stalled recovery, influenced by energy shocks and the deceleration in world trade and China’s economy. The European Central Bank (ECB) and the Bank of England are navigating through high core inflation and weakened economic outlooks, adjusting their monetary policies to address the prevailing economic challenges.
The global economic scenario in 2023-2024 is characterized by a complex interplay of monetary policies, market conditions, and economic growth trajectories. The evolving economic landscapes in major economies like the US, Europe, and China are shaping the global growth outlook, with monetary tightening, market slumps, and economic resilience emerging as pivotal factors influencing the future economic landscape.
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