Economics: 2023 Outlook

Recessions loom

We continue to forecast recessions across advanced economies, although milder than average in the US. This will be driven by higher energy prices, deteriorating housing markets, constrained household consumption, and a pullback in capex.

Inflation will ease, but central banks may remain cautious

A decline in economic activity and a normalisation of supply chains should result in disinflation next year. But central banks may cut rates more cautiously than usual as inflation looks set to remain volatile with lingering upside risks.

It’s boom or bust for China

China’s outlook is less certain. ‘Optimising’ its Covid policy will either restore household confidence and stabilise housing or it won’t. Fiscal constraints could tip the balance either way. Other EMs may see a larger-than-normal divergence.