SFC Outlook 2024|Global economy: A decent year for emerging markets

2024年02月10日 19:30   21世纪经济报道 21财经APP   谢鸿州

南方财经全媒体记者谢鸿州 广州报道

The global economy in 2024 is still facing a lot of challenges. The uncertainty was echoed among economists around the world. How will the economy perform this year? Will the inflation go up again? What regions will drive global growth? We have invited economists from different organisations to share their views.

Global economic growth expected to slow down

SFC Markets and Finance: Fitch predicts a sharp decline in global growth to 2.1% in 2024. What are the main factors contributing to this forecast? 

Brian Coulton: We do think the global economy is going to slow down. Two key drivers of that. One, the pickup in growth in China that we saw last year was more of a kind of one-off type of adjustment. So this sort of (adjustment), we were calling it a normalization of consumption, as previously constrained consumption on services was allowed to go back to something much more in line with historical norms. But that's not something that creates ongoing growth. So we don't see the underlying strengthened consumer spending on a sort of sequential month basis that's not anywhere near strong. So that was one-off boost that we're not going to see this year. And that's partly why we're expecting Chinese growth to select to slow down.

The second factor is what I said about monetary policy transmission in the U.S. not being as powerful or rapid as we expected. So far, we still see a lagged impact from this year. And what we point to the fact that bank credit growth to the corporate sector and the household sector in the U.S. has slowed very sharply, and that we think is going to feed into lower growth over time. So it's the lagged impact of the monetary policy that we've seen today in the U.S. and the one-off booster growth in China last year fading out of the numbers. 

SFC Markets and Finance: Which region will face heightened risks?

Brian Coulton: In terms of how our forecasts have been changing recently, where we've had positive revisions to our U.S. (economy) forecast. And there's probably still a little bit an upside risk to the U.S. outlook in the near term. Even though we do expect to slow down, some of the high frequency numbers are still looking quite strong on the labor market, retail sales. So I wouldn't point to the U.S. at the moment as being the key downside risk.

The Eurozone was where we cut our forecasts in December. And we are seeing some signs of real stagnation in the Germany economy. The German economy hasn't expanded relative to its pre-pandemic level, the Q4 2019 level. Germany's economy shrank in the 4th quarter and is now smaller, not as big as it was back in Q4 2019. Nearly every other advanced economy has exceeded that pre-pandemic level, following strong recoveries in 2021 and 2022. So I think there are downside risks in the Eurozone. 

SFC Markets and Finance: Europe faced challenges in 2023 with mild recessions in the Eurozone and the UK. Will the recession end in 2024? 

Brian Coulton: We think that there will be an improvement. We do have a pickup in growth, from 2nd, 3rd quarter this year. And that's really driven by a view that as inflation comes down, headline inflation comes down, wage growth is going to be quite sticky. And so that's going to lead to an improved real wage growth picture. So we're going to see some recovering real wages, and we think that will help the consumer in Germany and elsewhere. But it's not going to be a strong recovery. We do see that this weakness in world trade is weighing on the German recovery. And there's probably still some lagged impacts from monetary tightening to come through as well.

And, those things are sort of dampening what should be quite an important boost from the decline that we've seen in global gas prices. And that was a big negative shock in 2023. That the jump, the massive surging in natural gas prices in the 2nd half for 2022, was a huge shock that weighed on the Eurozone economy, in the German economy, particularly last year. But that shock is eased quite sharply. We've seen natural gas, car prices come down. So that's what we call an improvement in the terms of trade, and that should be helping things, but we think that's going to be dampened by the weakness of world trade and the weakness in Germany, and still some headwinds from monetary policy tightening. 

U.S. may experience mildest hard landing this year

SFC Markets and Finance: The recent data showed the inflation continued to fall. Do you think the inflation will go up again in the U.S. and Europe?

Arend Kapteyn: It could go up in the monthly numbers, which we actually do forecast to happen. The monthly numbers are quite volatile, but the trend is unambiguously downwards. We've now reversed about 90% of the global run up in inflation, if you look at the monthly sort of annualized run rates, and it's really across all the components. It's not just energy, foods coming down, goods inflation are already completely normalized, and even service inflation is now starting to come down quite strongly. So I think that the big story for 2024, we are going to land very close to pre-pandemic inflation levels.

SFC Markets and Finance: Like you mentioned, the economic data is very awful in Europe. How do you think about the Eurozone economy this year?

Arend Kapteyn: We actually have a recession model for both the U.S. and Europe, and they have the same recession probability about 90%. But if you look at the actual data in Europe, you would look at Europe and say ‘well, Europe is already in recession.’ And yet we're not forecasting recession. And the U.S. is, looking at the data, it doesn't look to be a recession and yet we're forecasting it. Now, the reason we're not forecasting it for Europe and we are for the U.S. is that in the U.S., there's an enormous imbalance between spending and real income. People are spending much more than the income that they have. In Europe, that's not the case. So in Europe, the starting imbalance is actually very low. But at the same time, consumer confidence is low, people are not spending, they're not using their excess savings that they accumulated. So the consumption is just much weaker than in the United States.

And I think there's a different level of confidence in Europe. Where that partly comes from is the housing prices have declined sharply, that's really having an impact on consumer behavior. The other reason is that Europe is in many ways like an emerging market. It’s very open, very trade dependent. That is the weakest part of the global economy, and so they're more exposed to that than the U.S., which is partly why growth is so weak.

SFC Markets and Finance: Many experts think the global GDP growth will slow down in 2024. What's your prediction?

Arend Kapteyn: We have a slowdown. Our estimate is that in 2023, global growth was about 3%, maybe 3.1%. In 2024, we have 2.6%. So we have that slowdown, really only coming from two economies, China and the United States.

In the case of China, that is mechanical. Because sequentially, we think things get better, but you don't have a repeat of the Q1 reopening bounce last year. The U.S. is because we have a recession. If you look at the rest of the world, there's actually not a whole lot of movement in the data. Now in parts, the rest of the world is already weak. So at the median level, if you look at the average country in the world, not weighting it by GDP or anything, you just look at the average economy, is growing at about 1%, 1.5% right now. That is historically weak. So when you do the forecast, we're not expecting that to get weaker.

The other thing that's happening is that all the central banks are starting to reverse the hiking cycles. So a lot of the headwinds that we had in 2023, this tightening, that withdrawal of credits from corporates and businesses, that's started to get better. So the first half of the year there is probably still a lot of those headwinds. The second half of the year, they start to go away, and it starts to get a bit better.

SFC Markets and Finance: Which region do you think will drive global growth this year? 

Arend Kapteyn: I think on average, emerging markets are going to do a little bit better than developed markets. One reason is that, the weakest part of the global economy right now is trade and that is really emerging markets. But that is starting to turn. And particularly if you look at Asia, there's really been a decoupling since roughly the summer between Asia and the rest of the world where the trade data in Asia is starting to get better. The growth differential between emerging markets and developed markets will start to increase again. So, in that sense, we're more optimistic from a growth perspective on Asia.

Now whether from a market perspective, emerging markets can decouple from developed markets, I'm much more skeptical. So if we have a recession in the U.S., it is very unlikely, with the exception of China, I think that emerging market equity markets would not go down along with U.S. So I distinguish a little bit growth from markets, they might behave in different ways this year.

2024 a decent year for emerging markets

SFC Markets and Finance: Emerging markets are playing a more important role in global economy, how do you think of the economy prospect of emerging markets in 2024?

Paul Gruenwald: I would kind of divide them into a couple of groups. The emerging markets that are large and have big domestic markets, like in India, Indonesia, maybe even Brazil. They're going to do relatively well. If you're plugged into the U.S., maybe even Mexico, I might even put Vietnam in that group. You're going to do well. Europe is slowing down. So, if you're Poland or Hungary, you may be slower. Trading economy is also a little bit weak, so it depends on which bucket you're in. But overall, it should be a decent year for emerging markets.

SFC Markets and Finance: Any specific regions that are most promising or concerning?

Paul Gruenwald:If you've got the right materials on the ground for the energy transaction, or you have a lot of wind and solar, I think you're in good shape. Some of the frontier markets have a lot of debt. We're going to be struggling with that. And again, global trade looks kind of weak. So, if you're a trading economy, you're highly indebted, maybe not so good.





记者:谢鸿州 周蕊 


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