Research Briefing | Apr 13, 2023

Recent bank problems have not derailed our outlook

The recent banking sector turmoil could trigger a chain reaction of events that plunges the global economy into recession. However, we don’t think this is the most likely scenario. We’ve left our world GDP growth forecast for 2023 little changed at 1.9% and cut our outlook for 2024 by 0.3ppts to 2.2%.

What you will learn:

  • The main channel via which we expect problems in the banking system to spill over to the global economy is tighter credit conditions for businesses and consumers. We expect this would have a relatively larger impact on investment, albeit most likely with a lag of two to three quarters.
  • At a global level, we now expect the anticipated steady but unspectacular quarter-on-quarter GDP growth rates of 2023 to continue in H1 2024. Our new forecast of 2.2% GDP growth 2024 leaves us a little below the consensus forecast and the recent updates from the IMF and OECD.
  • Central banks are unlikely to cut rates soon. We still expect the Fed to raise its policy rate two more times and the ECB to hike three more times this year. This is because the banking turmoil will have a limited effect on the real economy, inflation will remain too high for comfort, and policymakers have a sizeable financial stability toolbox to relive pressures in the banking system.
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