The UK and eurozone economies are likely to face recession next year, but the United States may be able to avoid it thanks to a robust labor market, analysts told Morgan Stanley.
At the same time, China’s expected resumption after nearly three years of COVID-19 containment should lead to a recovery in its economy and other emerging Asian markets, they said.
Risks are declining, the reports said, predicting global growth of 2.2 percent next year, below the International Monetary Fund’s latest growth estimate of 2.7 percent, Reuters noted.
Morgan Stanley predicts a sharp split next year between advanced economies in or near recession, while emerging economies are modestly recovering, but overall global recovery is likely to remain elusive. China’s economy is projected to grow by 5% in 2023, exceeding the 3.7% average growth expected for emerging markets, while average growth in the group of 10 developed nations is projected at just 0.3%.
Morgan Stanley predicted that the Federal Reserve will keep rates high in 2023 as inflation remains high after peaking in the fourth quarter of this year.
The U.S. economy is over the recession in 2023, but the landing doesn’t seem so soft as job growth slows significantly and the unemployment rate continues to rise, the report said, predicting a 0.5% increase next year.
The cumulative effect of tight policies in 2023 extends into 2024, resulting in two very weak years, the report added.
Globally, the analysts said, inflation should peak this quarter, and deflation will play a key role next year.
