The 2023 Global Economic Outlooks are Here, and They’re not all Doom and Gloom
The economic forecasts for 2023 from Goldman Sachs, JP Morgan, Morgan Stanley, and Credit Suisse are IN and they're actually more optimistic than I was expecting. For those of us here in the US, they're predicting that we should avoid a recession and/or experience a very moderate recession overall (in contrast with Bridgewater Co-CIO Greg Jensen’s predictions in September 2022 of a potential multi-year, global recession combined with worsening, ongoing inflation); inflation should start to decline somewhat in the latter part of 2023; and the Fed will most likely cap interest rate hikes at 5-5.25% for the year (up from where we are currently at 4.25-4.50%).
Of course, when it comes to forecasting downturns the analysts at Bridgewater often get it right when everyone else gets it wrong. We shall see.
Unfortunately, analysts at Credit Suisse and Goldman Sachs acutely predict a mild recession for the UK and the Eurozone (largely due to surging energy bills), and a "growth" recession in China this year. Subsequently, they forecast a gradually improving economic situation across the globe during the latter half of 2023. JP Morgan analysts see some developing countries' economies experiencing a moderate recession as well during 2023, with many of them experiencing economic difficulties due to weak growth and inflationary pressures.
Key takeaway from the Credit Suisse report: "We expect the Eurozone and UK to have slipped into recession, while China is in a growth recession. These economies should bottom out by mid-2023 and begin a weak, tentative recovery – a scenario that rests on the crucial assumption that the USA manages to avoid a recession. Economic growth will generally remain low in 2023 against the backdrop of tight monetary conditions and the ongoing reset of geopolitics."
Key takeaway from the Goldman Sachs report: "The key economic question for 2023 is whether central banks will be able to bring down inflation to more acceptable levels without a recession, or at least without a deep recession. We are reasonably optimistic, but there are substantial risks to our view."
To read the 2023 macro outlooks: