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According to S&P Global Market Intelligence, economies in Asia and the Pacific will dominate global growth next year.

S&P expects the region to achieve real growth of around 3.5% in 2023, while Europe and the US are likely to face a recession.

“Asia Pacific, which produces 35% of global GDP, will dominate global growth in 2023, supported by regional free trade agreements, efficient supply chains and competitive costs,” S&P said in a note.

The firm cut its forecast for global real GDP growth by 0.6 percentage points from last month’s forecast of 2%, and now expects to see growth of 1.4% in 2023. That’s a sharp decline from 5.9% global growth in 2021 and even slower than 2.8%. % growth that S&P expects for 2022.

While a negative outlook outside the Asia-Pacific casts a shadow over the broader global economy, S&P predicts the world can likely avoid a full-blown recession.

“With moderate growth in Asia-Pacific, the Middle East and Africa, the global economy may avoid a recession, but growth will be minimal,” said Sara Johnson, executive director of economic research at S&P Global Market Intelligence.

“Global economic conditions continue to deteriorate as inflation remains uncomfortably high and financial market conditions tighten,” he said, adding that Europe, the United States, Canada and parts of Latin America they will likely see a recession in the coming months.

The company added that Southeast Asia and India would benefit from the diversification of its trade “away from mainland China”.

In an era of market volatility, India has benefited from having an outlier economy and comparatively robust growth.

Data from CNBC’s Supply Chain Heatmap shows that China is losing more manufacturing and export dominance, driven significantly by its zero-Covid policy.

Given its expectations of moderate inflation and easing of monetary policies in the coming years, S&P says it expects global real GDP to pick up to 2.8% in 2024 and 3.0% in 2025.

Recession in the US, Europe
The economies of Europe and North America, which account for more than half of global output, are likely to face a recession in late 2022 and early 2023, S&P said.

“Exceptionally high inflation is draining purchasing power and will lead to a decline in consumer spending,” he said in the note. “Both Europe and North America will face the impacts of softening demand and tightening financial conditions in the housing and capital investment markets.
S&P said the expected contractions in the US and Europe will also have spillover effects around the world through trade and capital flows.

Fitch Ratings also expects the US economy to enter “genuine recession territory” in the second quarter of 2023, although it said that would be relatively mild by historical standards.

“The projected recession is quite similar to that of 1990-1991, which followed the similarly rapid Fed tightening in 1989-1990. However, the downside risks come from non-financial debt ratios/ GDP, which are much higher now than in the 1990s,” said Olu Sonola, head of regional economics for the US.
Source: CNBC