Morgan Stanley’s global economic outlook: Five takeaways
Context- Morgan Stanley’s latest forecast suggests that some of the wealthiest countries will struggle to grow in the coming months while China is expected to regain its growth momentum.
The TABLE alongside is sourced from Morgan Stanley’s latest forecast report. It looks at the expected trends for both GDP (Gross Domestic Product) and inflation (calculated by Consumer Price Index or CPI). (The quarters are aligned to the calendar year. As such the first quarter or Q1 of 2023 refers to the months of January to March. )
(Credits- Morgan Stanley)
What are the key takeaways from these forecasts?
- Both global growth as well as global inflation is likely to moderate through 2023 and 2024.
- Some of the wealthiest countries in the world are in for a tough time. The G10 countries are likely to witness rather anaemic growth rates. The G10 grouping refers to, oddly enough, 11 industrialised countries.
- The member countries are Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States. As the names suggest, the G10 refers to some of the wealthiest countries (in per capita income terms) in the world.
- The United Kingdom, the economy India overtook last year in terms of overall GDP, will continue to struggle and is unlikely to manage even a GDP growth rate of 1% in the next year and a half.
- China, on the other hand, is expected to progressively recover its growth momentum. Even so, it is unlikely to challenge India in terms of GDP growth rates. However, Chinese economy is almost five-times India’s size (in terms of GDP). So when China grows at 5% in a year, it adds $1 trillion to its GDP, which is already around $20 trillion. To match the same level of additional GDP, India will have to grow at more than 25% because India’s existing GDP base is less than $4 trillion.
- On the inflation front, it looks like US inflation is likely to come fairly close to the US central bank target of 2% by the end of 2023. This would be good news because the US central bank actions tend to have an oversized impact on economies across the world including India. If inflation is under control in the US, India can look forward to a more stable interest rate scenario, which, in turn, will help business plan and invest.
Conclusion- Higher interest rates all over the world due to aggressive tightening(by Central banks) has had a negative impact on credit availability. It further impacted the world’s overall economic growth coupled with the shocks like Russia Ukraine war.
Syllabus- GS-3; Economy GS-2; International Relations
Source- Indian Express
