The global economy is likely to avert a recession, says S&P Global Market Intelligence

In a statement on Thursday (May 25), S&P Global Market Intelligence executive director, economic research, Sara Johnson said that aside from a mild deceleration in the second quarter, a moderate growth pace will likely be sustained.

She said after a 3.1% advance in 2022, the S&P Global Market Intelligence forecast calls for world real GDP (gross domestic product) to increase 2.3% in 2023, 2.6% in 2024, and 2.9% in 2025.

Jonhson said different sectors are experiencing the ups and downs of business cycles but at different times.

"Economic cycles also vary across countries, reflecting the timing of Covid-19 outbreaks and policy responses or the impacts of the Russia-Ukraine war on international trade and capital flows.

"The result is an asynchronous global expansion. The global economic expansion will proceed at a moderate pace, led by service sectors.

"Economic performance will vary widely across sectors and regions, with Europe and the Americas experiencing sluggish growth and parts of Asia-Pacific and Africa enjoying healthy expansions," she said.

Johnson said with commodity prices on a downward path and supply constraints easing, inflation will diminish, allowing monetary policies to ease in 2024-25.

Asia-Pacific will lead all regions in economic growth.

Johnson said that sparked by mainland China and India, Asia-Pacific's real GDP growth should strengthen from 3.2% in 2022 to 4.3% in 2023, and 4.5% in 2024.

She said S&P Global's PMI (purchasing managers index) surveys show India leading all major economies with robust growth in both services and manufacturing.

"While growth in Taiwan, South Korea and Australia have slowed markedly, expansions in Vietnam, the Philippines and Indonesia remain robust.

"Mainland China's economic data through April gives mixed signals: services output and retail sales have rebounded strongly, outpacing subdued growth in fixed investment and exports.

"After 3.0% growth in 2022, mainland China's real GDP is projected to increase 5.5% in 2023, before resuming a long-term deceleration," she said.

Meanwhile, Johnson said the US economic outlook is clouded by banking stresses and massive federal budget deficits.

She said this month's forecast of US real GDP growth has been marked down from 1.4% to 1.2% for 2023, and from 1.5% to 0.9% for 2024.

"While the forecast assumes that the federal debt ceiling will be raised in time to avoid a default, the current impasse is rattling financial markets and is expected to cause a temporary drop in stock prices.

"With the annual federal deficit projected to exceed 6% of GDP throughout the decade, the United States is in a deep fiscal hole that will eventually need to be addressed.

"The downward forecast revisions also reflect a potential deterioration in the quality of commercial real estate loans that leads to a further tightening of bank credit standards and reduced investment in non-residential structures," she said.

Johnson said the US unemployment rate is projected to rise from 3.4% in April to 4.8% in 2025, contributing to a deceleration in wages and prices. As interest rates retreat, real GDP growth should pick up to 1.6% in 2025.