Economists at Goldman Sachs expect the US to narrowly avoid a recession next year as Europe’s economy contracts. Meanwhile, China’s GDP is forecast to increase slowly during the first half of 2023 and then accelerate as covid restrictions are reduced.

A mild recession in Europe

“We expect global growth of just 1.8% in 2023, as US resilience contrasts with a European recession and a bumpy reopening in China.”

“The US should narrowly avoid recession as core PCE inflation slows from 5% now to 3% in late 2023 with a ½pp rise in the unemployment rate. To keep growth below potential amidst stronger real income growth, we now see the Fed hiking another 125bp to a peak of 5-5.25%. We don’t expect cuts in 2023.” 

“The Euro area and the UK are probably in recession, mainly because of the real income hit from surging energy bills. But we expect only a mild downturn as Europe has already managed to cut Russian gas imports without crushing activity and is likely to benefit from the same post-pandemic improvements that are helping avoid US recession. Given reduced risks of a deep downturn and persistent inflation, we now expect hikes through May with a 3% ECB peak.”

“China is likely to grow slowly in H1 as an April reopening initially triggers an increase in covid cases that keeps caution high, but should accelerate sharply in H2 on a reopening boost. Our longer-run China view remains cautious because of the long slide in the property market as well as slower potential growth (reflecting weakness in both demographics and productivity).”

This article was originally published by Fxstreet.com.Read the original article here.

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