Moderate growth in the euro zone and recession in the US

A recession at the end of 2023 in the United States, moderate growth in the euro zone, normalization in China and emerging markets still under pressure. These are the main conclusions of our economic forecasts in 2023 and 2024.

We have slightly revised our growth forecasts for some major economies compared to our latest forecasts but we still expect a slowdown in global growth in 2023. We forecast +2.2% growth for 2023 and +2.3% in 2024. If we only look at world trade (goods and services), we do not expects minimum volume growth of +0.9% for 2023 (in 2022 growth was still +3.7%). The value of world trade will contract by -0.3% this year (against +9.6% in 2022).

Europe will continue to struggle this year, but will gain strength next year. We are still seeing mild technical recessions in Germany and Italy. The Eurozone economy is still struggling with high inflation rates. We see weak consumption and investment momentum fueled by various uncertainties such as geopolitical tensions and unrest in the banking world.

We see a slowdown on several fronts (housing market, production of goods and construction). Investments are held back by higher financing costs due to rising interest rates. Weak demand will keep manufacturing around recessionary levels this year. This is partly explained by the decline in consumer purchasing power and the postponement of replacement investments. We also expect fiscal stimulus to be reduced in the second half of 2023.

Government support measures (caps on energy prices) have recently slowed inflationary pressures. On an annual basis, inflation is still above 8% (compared to the previous year). This is four times more than the ECB's 2% target. We believe that commodity prices will continue to decline this year, in part because supply chain issues diminish. This is offset by rising labor costs. We expect inflation to reach 5.6% this year and 2.6% next year.

Despite a strong first quarter, we see the US economy making a hard landing at the end of 2023, leading to a deep recession. The main reasons are lower retail sales, industrial production and capital goods orders.

Businesses face rising costs on several fronts, such as higher wages, additional environmental costs and higher financing costs. Business confidence is under pressure. Never before, have business investment plans been so weak outside of recessions as they are today.

The Chinese economy is normalizing. The strict measures due to the coronavirus have been lifted more quickly, so that the economy is getting back on track. Consumer spending, in particular, is driving this economic recovery. For the Chinese economy, we forecast GDP growth of +5.0% in 2023 (after +3.0% in 2022), then +4.8% in 2024.

The coronavirus had negative impact on the sovereign debt of emerging countries. Debts will continue to rise this year as well. The current monetary uncertainty leads to higher (re)financing costs and the flow of investments will decrease further. We forecast a recovery in growth in Asia-Pacific to +4.1% in 2023 and +4.3% in 2024, supported by the rebound in China. For Eastern Europe, the Middle East and Latin America, we anticipate a slowdown in growth to +0.9%, +2.7% and +1.5% respectively in 2023, before recover in 2024.