China will be an “important driver” for global recovery in the second half of 2023 according to Standard Chartered Bank, which expects the country’s gross domestic product (GDP) to grow at 5.8 per cent, higher than the market consensus of 4.9 per cent.
Consumption in China, coupled with recently announced policy support measures for the real estate sector, should lift the outlook for the broader economy in H2 said the bank in its economic outlook report for the coming year.
“Economic reopening should also increase the effectiveness of policy initiatives such as stimulus programmes, lending quotas and credit support measures,” it added.
Also supporting global recovery in the second half will be the US and the euro area as they emerge from “relatively shallow recessions” said the bank.
It expects global GDP growth of 2.5 per cent in 2023, slowing from an expected 3.4 per cent in 2022. While headwinds that have faced most economies in 2022 will persist in the months ahead, recovery should take hold in the second half.
“Growth in the US, euro area and China should pick up in the second half of 2023 and ASEAN economies are likely to still outperform global growth with steady domestic consumption, healthy labour markets and tourism recovery,” said Edward Lee, Chief Economist, ASEAN and South Asia, Standard Chartered.
They also expect most central banks globally to end their rate-hiking cycles by the first half of 2023, allowing financial conditions to at least stabilise by mid-year.
The International Monetary Fund raised its 2023 global growth outlook to 2.9 per cent in January, a slight improvement over its October prediction of 2.7 per cent. They cited “surprisingly resilient” demand in the United States and Europe, an easing of energy costs and the reopening of China’s economy.
The Fund revised its China’s growth outlook up from 4.4 per cent in its October forecast to 5.2 per cent but added that China’s growth will “fall to 4.5 per cent in 2024 before settling at below 4 per cent over the medium term amid declining business dynamism and slow progress on structural reforms”.
Closer to home, ASEAN's growth drivers are expected to continue to recover; already, domestic consumption has started to pick up and labour mobility and tourism should continue to improve, said Standard Chartered.
Countries such as Vietnam continue to enjoy high-growth status (the bank said it expects strong growth of 7.2 per cent in 2023 and 6.7 per cent in 2024, following a solid recovery of 7.5 per cent in 2022).
However, more trade-oriented ASEAN economies are likely to face downward pressures on exports as global growth weakens in the first half of this year, said the bank.
Globally, world trade is expected to slow as pent-up demand moderates and tighter monetary policy curbs new demand. Geopolitical tensions are also expected to affect trade flows.
The World Trade Organisation predicts that global merchandise trade will grow by a modest 1 per cent in 2023, down from 3.5 per cent in 2022.
Singapore in particular may see more growth headwinds than tailwinds. The bank expects GDP growth to ease to 2.0 per cent from 3.6 per cent in 2022 largely due to a weak external outlook as the US and Europe are expected to slow on account of monetary policy tightening and high inflation and China’s recovery may be slow and bumpy.
On the inflation front, Standard Chartered said it forecasts average headline and core inflation of 5.0 per cent and 4.4 per cent in 2023, easing from 6.1 per cent and 4.2 per cent in 2022. Both forecasts for Singapore include the 1 percentage point impact of GST implementation in January.
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