TOKYO, Nov 14 (Portal) – Britain and euro-zone economies are likely to slide into recession next year, Morgan Stanley said, but the United States could narrowly escape thanks to a robust job market.
At the same time, China’s expected reopening after nearly three years of COVID-19 restrictions will lead to a recovery in its own economy and other emerging Asian markets, the investment bank’s analysts said in a series of reports released on Sunday.
“The risks are on the downside,” said the reports, which forecast the global economy to grow 2.2% next year, below the International Monetary Fund’s most recent growth estimate of 2.7%. Continue reading
Over the next year, Morgan Stanley forecasts a sharp divide between developed economies “in or near recession” while emerging markets “recover slightly” but said a broader global recovery would likely remain elusive. China’s economy was forecast to grow by 5% in 2023, beating average growth of 3.7% expected for emerging markets, while average growth in the group of 10 developed countries was forecast at just 0.3%.
Central banks around the world have hiked interest rates this year to stem raging inflation, and in the United States, Morgan Stanley predicted the Federal Reserve will keep interest rates high in 2023 as inflation peaked in the fourth quarter quarter of this year remains strong.
“The US economy is narrowly avoiding recession in 2023, but the landing doesn’t feel as soft as job growth slows significantly and the unemployment rate continues to rise,” the report said, forecasting growth of 0, 5% next year.
“The cumulative effect of tight policies in 2023 spills over into 2024, resulting in two very weak years,” the report added.
Global inflation is also likely to peak in the current quarter, analysts said, “with disinflation driving the narrative next year.”
- US core inflation to fall to 2.9% by the end of 2023, headline inflation to 1.9%
- Asia growth will ease to 3.4% in H1 2023 before rebounding to 4.6% in H2 23, driven by domestic demand
- Cross-asset returns — particularly for fixed income — will look much better in 2023 than 2022, reflecting lower starting valuations
- Quality fixed income to outperform global equities
- EM and Japan stocks outperform, US stocks lag
Reporting by Kevin Buckland, editing by Miral Fahmy
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