Outlook 2023: Paul O'Connor (Janus Henderson Investors)

Outlook 2023: Paul O'Connor (Janus Henderson Investors)

4 januari 2023

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By Paul O'Connor, Head of Multi-Asset at Janus Henderson Investors

What is the economic outlook for 2023?

‘The global economy looks set for a challenging year in 2023 as rising interest rates and the cost-of-living squeeze push a number of major countries into recession. Consensus forecasts of real GDP growth for the new year are 0.4% for the United States, -0.1% for the eurozone and -0.5 % for the United Kingdom. Economists have been relentlessly downgrading these projections recently as they have struggled to keep up with the mounting impact of rising interest rates on next year’s consumer and corporate activity.

If there is some good news to focus on here, it’s that inflation looks close to a peak in most economies. If that’s right, then the upside to interest rate expectations is probably fairly limited, with market estimates of peak rates now at levels that economies seem unlikely to be able to withstand for very long. Central banks will be reluctant to signal that rates have peaked, until core inflation is clearly trending down, but markets are likely to pre-empt this, if growth loses momentum in the months ahead, as we expect.

China remains a great source of uncertainty for the world economy in 2023. Economists are projecting a significant rebound in Chinese growth, on the view that the government will eventually abandon its Zero-COVID policy. However, the economic and financial threats from the unfolding property correction remain a major source of downside risks. The policy choices of the Chinese government on both fronts could have big repercussions for the growth outlook next year, in China and beyond.’

 

Inflation looks close to a peak in most economies.

 

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