Global Financial Firms Forecast World Economic Growth to Slow to 2.6% Next Year

Survey of Major Global Financial Firms and Scholars
2.6%, 0.3%P Lower Than This Year
Due to High Interest Rates, Oil Prices, and China's Economic Slowdown
High Expectations for US Soft Landing

Next year’s global economic growth rate is projected to slow further to 2.6%, down from 2.9% this year. This outlook is supported by expectations that the world economy is entering a prolonged low-growth phase amid sustained high interest rates aimed at stabilizing inflation.

According to a survey released on the 16th (local time) by major foreign media, leading global financial institutions and economists forecast that the global economic growth rate will slow from 2.9% this year to 2.6% next year. The foreign media analyzed, "Due to the prolonged high interest rate environment, rising energy prices, and economic slowdown in China, the world’s second-largest economy, the economic growth rate is expected to decelerate further next year." They particularly pointed out that the de-China strategy, where global companies relocate production bases outside China, is impacting China’s economic slowdown.

Most economists expect mild recessions to occur in Europe and the United Kingdom. The European Union (EU) region’s economic growth rate for next year is expected to be between 0.30% and 0.90%, essentially stagnating. In the UK, there is even a possibility of negative growth, ranging from -0.1% to 0.6%.

On the other hand, the United States is expected to be the only major economy to avoid recession and achieve a soft landing. The forecasted economic growth rate for the US next year is between 1.10% and 2.10%. One foreign media outlet noted, "Although uncertainty remains regarding the Federal Reserve’s (Fed) monetary tightening path, the possibility of a soft landing for the economy remains high." This analysis raises expectations for a ‘Goldilocks’ scenario, where inflation is controlled without pushing the economy into recession.

Eric Kirbi, Chief Investment Officer (CIO) of NorthStar Investment Management, also said, "The market has struggled with negative outlooks on recession and inflation, but reality is different. It seems we are at a Goldilocks point."

Fed officials also assessed that inflation is making definite progress. However, they remain cautious about the economic soft landing. In a speech at the ‘2023 Asia Economic Policy Conference,’ Fed Director Lisa Cook said, "I believe a soft landing is possible due to ongoing disinflation and a strong labor market, but I cannot be certain." Loretta Mester, President of the Cleveland Federal Reserve Bank, also evaluated that there has been definite progress on inflation.

Indicators show that inflation is slowing down. The US import prices released on this day fell by 0.8% compared to the previous month. The US Department of Labor explained, "The overall import prices declined due to a sharp drop in energy import prices." This follows the previously announced October Consumer Price Index (CPI, 3.2%) and Producer Price Index (PPI, 0.5%), with import prices also decreasing.

During the same period, retail sales decreased by 0.1% compared to the previous month. This is the first monthly decline in retail sales in seven months since March. Nationwide’s Chief Economist, Cash Bostanchik, said, "Consumer spending will be constrained due to slowing income growth, depletion of excess savings, and worsening credit conditions caused by high interest rates." Personal consumption accounts for two-thirds of the US real economy.

[Image source=AP Yonhap News]

Some analysts interpret this consumption slowdown as a ‘precursor to deflation.’ As consumption fails to recover, the inflation rate could fall from its peak, moving beyond disinflation into deflation, which could trigger an economic recession. Doug McMillon, CEO of Walmart, the largest retail company in the US, said during a conference call after announcing third-quarter earnings, "Deflation could appear within the next few months," adding, "It is too early to say how dramatically deflation will manifest."

Concerns over the forecasted slowdown in consumer spending were reflected in Walmart’s stock price, which dropped more than 8% that day. Ted Decker, CEO of Home Depot, which announced earnings on the 14th, also analyzed that although the worst inflation environment has passed, consumers have been reducing purchases in recent months.

This content was produced with the assistance of AI translation services.