Oxford Economics has revised up its 2023 GDP growth forecast for emerging markets (excluding China), from 1.7 per cent to 2 per cent.
The outlook for China’s economy has also been upgraded by 0.3 per cent to 4.5 per cent following Beijing’s scrapping of harsh COVID-19 restrictions.
According to Oxford Economics, the revision reflects growing expectations of a “milder near-term downturn”, with global sentiment “improving” amid evidence of an easing in inflationary pressures, and stronger than anticipated economic activity in advanced economies.
“We remain sceptical about the scale of spillovers to the global economy as its recovery will be largely service-oriented, but some emerging economies — notably in Asia — should benefit,” Lucila Bonilla, emerging markets economist at Oxford Economics, said.
Ms Bonilla went on to note that a weaker US dollar and lower oil prices are helping EM balance sheets and easing cost pressures from imported goods.
“Headline inflation is peaking, which will mitigate the income squeeze,” she added.
This comes despite continued monetary policy tightening from the world’s central banks, with the US Federal Reserve hinting at further rate hikes in the coming months.
Ms Bonilla said despite the revision, risks remain “balanced”, claiming other forecasters, including the International monetary Fund (IMF) “seem too optimistic”.
The IMF is now forecasting global GDP growth of 2.9 per cent in 2023, revised up from 2.7 per cent.
This reflects a 0.1 per cent improvement in the outlook across advanced economies — from 1.1 per cent to 1.2 per cent — and a 0.3 per cent improvement across emerging and developed markets — 3.7 per cent to 4 per cent.
The IMF’s projection for China’s GDP growth in 2023 has seen the largest revision, with the economy now tipped to grow 5.2 per cent in 2023, up from 4.4 per cent.
“Although the downturn looks likely to be mild, the subsequent recovery may underwhelm,” Ms Bonilla added.
“Demand will be challenged by potentially sticky inflation, overtightening in core central banks, and scarring to potential GDP.”
