毕马威-全球经济展望Global Economic Outlook -2023.3

Global

Economic

Outlook

March2023

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GlobalEconomicOutlook–March2023

Introduction

Wemayonlybepart-waythrough2023,butthephrasethathasoverwhelminglydominatedconversations–fromboardroomstopoliticalchambersandMainStreets–hasbeenthecost-of-livingcrisis.Inrecentyears,theworldhasfacedwavesofchallenges,fromthepandemictotheinvasionofUkraine,totheunfoldingbankliquiditychallengesamidstskittishdepositors.Theimpactofsuchalengthyperiodofuncertaintyisbeingfeltbyeveryoneandthat’sreflectedinKPMG’slatestGlobalEconomicOutlook.

Howwegetbacktosustainable,long‑termgrowthisthebigquestionfacingboardroomsandpoliticalchambersaroundtheworldrightnow.Someofthebiggestinflationaryfears–widelypredictedlatelastyear–havebeenmitigatedbymoredirect,pro‑activepoliticalactiongearedespeciallytowardsgettingrisingenergypricesdown.Therearealsosignsthatothercommoditiesandfoodpricesarefinallystartingtoease–helpingconsumersandbusinessownerswho’vebeenfacingasignificantfinancialsqueeze.

Theactionstakenoverthecomingmonthsarelikelytoplayasignificantroleinthepaceandnatureoftheworld’seconomicrecovery.KPMG’sanalysisforecaststhatemploymentlevelsshouldremainrobust,evengivenrecenttechlayoffannouncements–asignthatthetightnessofthelabormarketfacedpost‑pandemicshowsnosignofeasing.It’sanindicationofthecomplexitiestheworldfacestoday.Strongemploymentfiguresareoftenheldupasanexampleofbuoyantmarketconditions,buttheycanalsoreflectthechallengescentralbanksarefacingastheyattempttojugglewageexpectations,tightenedcreditconditions

andtheever‑presentdangerthatanyshiftintheconflictinUkrainecouldbringinflationbackintothemix.Theupsideofastronglabormarket,combinedwithrelativelystrongpersonalsavingsamongconsumers–especiallyinEuropeandtheAmericas–meanswecouldstarttoseeareturntorobustconsumerspending,drivingareturntoslow‑but‑steadydomesticgrowthinkeymarkets.

KPMG’sGlobalEconomicOutlookisaforecast.It’sbasedondetailedanalysisoftrendsandmodelsfromKPMGfirms’economicspecialistsacrosstheworld.Diggingdeeperintothenumbersisn’tanexactscience,butitcanofferagoodindicationofwhatmaylieaheadandshouldhelptoequipbusinessleaderswithagreaterunderstandingofwhatliesbehindtoday’scomplexmarketplaces,enablingthemtodevelopmorerobuststrategiesfocusedontheultimategoalofareturntosustainable,globalgrowth.

ReginaMayor

GlobalHeadofClients&Markets

KPMGInternational

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GlobalEconomicOutlook–March2023

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Contents

Theglobaloutlook:Treadingcautiouslyamidrisks04

Countriesandregionsinfocus:

UnitedStates:Ataleoftwoeconomies

07

Canada:Windingdowntohitinflationtarget

10

Brazil:Newpoliciescouldstokeinflation

13

Mexico:Policyheadwindsmakeformutedgrowth

15

China:Domesticdemandasthekeyforrecovery

17

Japan:Recoverystifledbyrisingpricesandglobalheadwinds

20

India:Cautiouslyshiningamidglobaluncertainty

23

Germany:Europe’slargesteconomytoescaperecession

25

Austria:Mildrecession,slowrecovery

27

Switzerland:Testingthefrontiersofresilience

29

France:Economicoutlookcloudedbyinflationarypressures

31

Italy:Cautiousoptimismasoutlookbrightens

33

TheNetherlands:Economytoremainresilientasfiscaldeficitwidens

35

Ireland:Continuedgrowth,comeswithcaveats

37

UK:Short‑termmomentummasksunderlyingheadwinds

39

CentralandEasternEurope:Notauniformstory

42

SouthAfrica:Lackingthepowertogrow

45

Nigeria:Challengingmacroeconomicfundamentalsinatransitionperiod

47

Appendix:KPMGcountryforecasts

49

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GlobalEconomicOutlook–March2023

Theglobaloutlook:

Treadingcautiouslyamidrisks

Sharpfallsininflationwilllikelyleavebehindsomeoftherecentchallengesfortheglobaleconomy.

Centralbanksapproachingtheendofthetighteningcyclepartlyasaresponsetorisingtensionsinfinancialmarkets.

Easingsupplychainpressuresandresilientlabormarketstosupportrecoverybutuncertaintyabouttheoutlookisontherise.

Inflationnolongercentralstage

Theoutlookfortheglobaleconomytookapositiveturnearlyintheyear.Inflationarypressuresbegantoease,withglobalenergypricesbackatlevelslastseenpriortotheinvasionofUkraine.Inaddition,baseeffectsfromtheriseinenergypricesfollowingtheinvasionarenowcomingoff,puttingfurtherdownwardpressureoninflationfortherestofthisyear.Pricesofothercommoditiesaswellasglobalfoodpriceshavealsoeased.

However,domesticinflationarypressuresremainrelativelyelevatedinanumberofeconomies,inparticularthosewithtighterlabormarkets,althougheventhereinflationprobablyalreadypasseditspeakaroundthesecondhalfoflastyear(seeChart1),withheadlineinflationexpectedtocontinuefallingthisyear,andpotentiallyreachingcentralbanks’targetsby20241.

Chart1:CPIinflationamongG20economies

Annualinflation,%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

-1%

200020022004200620082010201220142016201820202022

Median35-65percentile

Source:RefinitivDatastream,KPMGanalysis.

Note:ThechartexcludesAustraliaandtheEU,asEUcountriesarecoveredindividually.

1SeetheAppendixforindividualcountryforecasts.

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GlobalEconomicOutlook–March2023

Centralbanksfaceatrickieroutlook

Whiletheoutlookforinflationhasimprovedsignificantly,manycentralbanksremainedcautiousatthestartoftheyear.Theconcernwasthattheboutininflation,asaresultofthereopeningofeconomiesafterCovid‑19restrictionsfollowedbyacommodityshockduetotheinvasionofUkraine,hasbeenembeddedininflationexpectationsandthereforepricingbehaviorsoffirmsandwageexpectationsofemployees.Theworryisthatinflationcouldremainsticky,withcoreinflation(whichexcludesitemssuchasfoodandenergy)stubbornlyhighandpriceriseswidespreadacrosstheeconomyduetoarelativelytighteconomicenvironmentinsomecountries.

Recenttensionsinthebankingsystem,whichweretriggeredbythecollapseofSiliconValleyBankandSignatureBankintheU.S.maycomplicatemattersforcentralbanks.Theuncertaintyitunleashedwillinevitablytightencreditconditionswhileexposingmarkets’fragilityfollowinganunprecedentedperiodofmonetarytightening.Lastyearsawasharpriseinpolicyinterestrates,withmostcentralbanksraisingthemsignificantlyduringtheyear(seeChart2).Whilethetighteningcyclealmostreacheditscourseinsomeeconomies,othercentralbanks–notablytheFedandECB–wereexpectedtotightenfurther.However,latestdevelopmentsinthebankingsectorandbondmarketscouldseeratespeaksoonerandatlowerlevels.

Chart2:Centralbankshavebeen

tighteningmonetarypolicy

Numberofcentralbankschanging

policyratesonthepreviousmonth

30

20

10

0

-10

-20

-30

Raisingrates

Cuttingrates

201720182019202020212022

Source:BankforInternationalSettlements,KPMGanalysis.

Roomforgrowth

Withmonetarypolicyfocusedonmoderatinginflationwhilestabilizingfinancialmarkets,fiscalpolicyisleftasthepotentialtooltoboosteconomicgrowth.Unfortunately,thepublicfinanceshavedeterioratedsignificantlyoverthepastthreeyears.GovernmentshavespentsignificantamountsonfirstshieldingtheireconomiesfromCovid‑19andsubsequentlyonprotectinghouseholdsandbusinessesfromhigherenergyprices.Thatleftpublicdebtathistoricallyelevatedlevels,withlessroomforexpansionaryfiscalpolicy.EvenintheU.S.,federalspendingisexpectedtoslowdespitetherampupininfrastructurespending,althoughinChinafiscalsupportistobesteppedupfollowingthereopeningoftheeconomy.Theriseininterestrateshasmadetheselargerdebtlevelsmorecostlytoservice,puttingfurtherpressureongovernmentfinances.

Nevertheless,somepositivegrowthmomentumisexpectedthisyearfromtherelativelysmoothreopeningoftheChineseeconomyfollowingtheliftingofCovid‑relatedrestrictionsinDecemberlastyear.Thepressureonglobalsupplychainshaseasedsignificantlyinrecentmonths,whileshippingcostshavedroppedtoo.Thisshouldhelpalleviatesomeinflationarypressuresandimprovesupplycapacity.Globaltraderemainsrelativelyweak,althoughwewouldexpectittorecoverthisyearastradeflowsnormalizewiththereopeningoftheChineseeconomyandarecoveryinglobalgrowth,whileweexpectgeopoliticaltensionstocontinuetoexertsomepressureontradeflowsoverthemediumterm.

Consumerdemandisalsoexpectedtopickupthisyear,withexcesssavings–moneysavedduringthepandemicwhenspendingoncertainserviceswasnotpossible–stillrelativelyhighinChinaandEuropewhichcouldpotentiallybedeployedonceconfidencereturns.Indeed,consumerconfidencehasstartedtoimproveinEurope,althoughitremainsatrelativelylowlevels(seeChart3).

Chart3:Consumerconfidence

Deviationsfromthe2018-19average

5

0

-5

-10

-15

-20

201820192020202120222023

UKUSEurozoneChina

Source:GfK,UniversityofMichigan,EuropeanCommission,RefinitivDatastream,KPMGanalysis.

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ContributionstoannualworldGDPgrowth,%

6%

4%

2%

0%

-2%

-4%

GlobalEconomicOutlook–March2023

Onelingeringriskisthatrisinginterestratesandtightercreditconditionswouldseefurtherfallsinhouseprices,particularlyintheU.S.andsomeEuropeaneconomieswherevaluationsarerelativelyhigh.Thatinturncoulddepressconsumerconfidenceandspendingagain.

However,thelabormarketremainsrelativelytightacrossmostcountries,andwearenotexpectinganymajorriseinunemploymentthisyear,asoutlinedinourforecastsforindividualcountriesintheAppendix.Thisshouldprovideanimportantsupportforhouseholds’incomesandconsumerspending,eventhoughrealincomesaresqueezedasaresultofthehighlevelsofinflation.Households’purchasingpowerisexpectedtorecovergraduallyoverthemediumtermaswageincreasesovertakeinflationoncemorefromnextyear.

Despitetheresilienceofthelabormarketandtheimprovinginflationconditions,weexpectglobaleconomicgrowthtoberelativelymodestoverthenexttwoyears,andtostaybelowitslong‑termaverage(seeChart4).GlobalgrowthisexpectedtobedrivenbytherecoveryoftheChineseeconomyandarelativelystronggrowthinsomeoftheemergingmarkets,whiletheEurozoneandU.S.economiesareexpectedtocontributelesstoglobalgrowthoverthenexttwoyears.

Riskstoourforecastsarebroadlyskewedtothedownsidegiventhevolatilityinfinancialmarkets.Theglobaleconomyhasbeenthroughaseriesofsignificantshocksoverthepastthreeyears–theCovid‑19pandemicandtheRussia‑Ukraineconflict–andsawamajorexpansiontogovernmentdebtandasignificanthikeinpolicyinterestratesbycentralbanks.Theramificationsofsomeofthatmaynothavesurfacedyetandwearestilltoseetheirfullimpactandhowtheyinteract.

YaelSelfin

ChiefEconomist,KPMGintheUK

Chart4:KPMGglobalgrowthprojections

Forecast

20052006200720082009201020112012201320142015201620172018201920202021202220232024

USChinaEurozoneOtheradvancedeconomiesOtheremergingeconomiesWorld

Source:IMF,KPMGprojections.

GlobalEconomicOutlook–March2023

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Recenteffortsbyregulatorsarehopedtoeventuallycalmfinancialmarkets;thatwillnotpreventamoresystemictighteningofcreditconditions.TheFederalReservewillweighthoseshiftsastheydeterminehowfartogoonratehikes.

UnitedStates:

Ataleoftwoeconomies

Ataleoftwoeconomiesisemerging:firmsthatbenefittedmostfromthepandemic‑inducedboomarepullingback,whilestartupsandfirmsthatwerelatetotherecoveryarestillrampingup.Laborshortagesaremorestructuralthancyclical.

Astronglabormarket,whichfeedsmoredirectlyintoservicesectorprices,isuppingtheriskofamoreprolongedandcorrosiveboutofinflation.Servicesectorinflationisgettingsticky.

GrowthintheU.S.isforecasttoslowtoa0.9%pacein2023,lessthanhalfthatof2022.Afterasolidstart,theeconomyisexpectedtosufferamildcontractionmid‑year.Theunemploymentrateisexpectedtorise,butonlymodestly.Pricesintheservicesector,wherelaborcostsplayalargerroleinsettingprices,arestartingtolooksticky.TheFederalReservewillcontinuetoraiseratesandkeepmonetarypolicyrestrictivewellinto2024.

Ataleoftwoeconomiesisemerging.Firmsthatbenefittedmostfromthepandemic‑inducedboomarepullingback;tech,financeandmanufacturingactivityarehardesthit.Startupsandfirmsthatwerelatetotherecoveryarestillrampingup.

Thepaceofhigh‑qualitybusinessformation–firmsthatintendtohire,nottheself‑employed–werestillnearly40%abovethepaceofthe2010sinJanuary.OurownanalysissuggeststhatthosefirmsaccountedformorethanhalfoftheexcessdemandforworkerssinceFebruary2020(seeChart5).

ThemostrecentJobOpeningandLaborTurnoverSurveyrevealedthatfirmswithlessthan250employeesdominatednethiringandjobpostingssincetheeconomyreopened.ThatcontinuedexceptforjobopeningsforconstructioninlateJanuary,whichplummeted.Employmentgainsactuallyacceleratedatthestartoftheyearasfirmswithlessthan250employeesabsorbedwhatisbeingshedatsomelargerfirms.

Table1:KPMGforecastsfortheU.S.

202220232024

GDP

2.1

0.9

1.3

Inflation

8.0

4.3

2.4

Unemploymentrate

3.6

3.6

4.3

Source:KPMGEconomics,BureauofEconomicAnalysis,BureauofLaborStatistics.

Note:ForecastsaredatedasofMarch2,2023.GDPandinflationareyear‑over‑year%change.Theunemploymentrateisanannualaverage.Numbersarepercentages.

Chart5:Highpropensitybusinessformation

High-propensitybusinessapplications(SA,number)

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

Recession

July2020

Jan-Jun

2021

Averagein2010s=100,000

Jan2019

Jul2019

Jan2020

Jul2020

Jan2021

Jul2021

Jan2022

Jul2022

Jan2023

Source:KPMGEconomics,CensusBureau.

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GlobalEconomicOutlook–March2023

Anatomyofaslowdown

Consumerspendingisexpectedtostallbutnotcollapse.Ahealingofhouseholdbalancesheetsandarampupinsavingisbuoyingdemand.Tightercreditmarketconditionsareerodingaffordabilityandwilltakeatollonemployment,especiallyamongyounger,smallerbusinessesthataremoresusceptibletothecurrenttighteningofcreditmarketconditions.

Big‑ticketitemssuchasappliancesandhomefurnishingsareexpectedtobehitharderthanservices;goodspurchasestendtogetfinanced,whilepentupdemandfortravelremainsstrong.Thoseoutofworkandunabletoworkduetovacationsarehittingmonthlyrecords.

Therecessioninhousingisexpectedtodeepen,withhigherinterestratesdealingalargerblowtosalesandconstructionthanprices.Anunusuallyhighpercentageofhomeownershaveeitherlockedintoanultralow30‑yearfixedmortgagerateorpaidofftheirmortgagesentirely.1Thathasprovidedahedgeagainstinflationforhomeowners,notrenters.Thesupplyofhomesforsaleisnearrecordlows,whichispushingmorewould‑behomebuyerstorentinsteadofbuyingsingle‑familyhouses.

Themultifamilymarketisfacinggreaterheadwinds.Thepipelineonmultifamilyconstructionisatarecordhighandvacanciesarerising(seeChart6).Unaffordabilityhasforcednewcollegegraduatestotakeonmultipleroommatestomakeendsmeetorworkfromtheirparents’homes.

Chart6:Recordpipelinefornew

multifamilyconstruction

Numberofhousingunitsunderconstruction,

SA,Thousands

1,000

900

800

700

600

500

400

300

200

100

0

January2023

Recordhigh

5units

ormore

Recession

197019751980198519901995200020052010201520202025

Source:KPMGEconomics,CensusBureau.

Ashigherratestakeatollonplanstoupgradeandexpandexistinginfrastructure,businessinvestmentisexpectedtocontract.Thepurchasingmanagers’surveysshow

thatmanufacturingactivityremainedincontractionaryterritoryatthestartoftheyear.Theoutlieristhevehicleindustry,whichisstillplayingcatch‑upduetoearliersupplychaindisruptions.

Investmentinstructuresisexpectedtoremainsuppressed.Firmscontinuetoshrinktheirofficefootprintsduetohybridworkmodelswithmanyexistingofficeleasesnotbeingrenewed.Theexceptionsareelectricvehiclesandchipplants,whicharebothbenefitingfromgovernmentincentives.

Inlate2022,retailinventoriesballoonedmorethanthoseinmanufacturinginventories.Theliquidationofthoseinventoriesisexpectedtosuppressproductionathomeandabroadwithimportsmakingupadisproportionateshareofretailinventories.

Governmentspendingispoisedtoslow,despitearampupininfrastructurespendingandthelargestbumpinSocialSecuritypaymentsinhistory.Thepoliticssurroundingtheraisingofthedebtceilingisexpectedtofurtherslowthepaceofgovernmentspendinginfiscal2024.TheconcernisTreasurymarkets,whichremainmuchlessliquidthantheywerepre‑pandemic.Thebondmarkethasgrownmoreskittish,whichmeanswecouldseemorevolatilitythanmanyexpectinresponsetothebrinkmanshipleadinguptoapackagetoliftthedebtceiling.

Thetradedeficitisexpectedtonarrow.Exportsareexpectedtoholdupbetterthanimports.Growthabroadhasbeensurpassingexpectations,whileasharpdrawdownininventorieswilltakeatollonimports.Retailinventoriesarestillbloated,withalargeshareofgoodsfromabroad.

Thewrinkleintheforecastforthetradedeficitisthestrongdollar,whichworkswithalag.Thatisunderminingourcompetitivenessathomeandabroad.Duringtheglobalfinancialcrisis,thedollarstrengthenedandtradecametoavirtualstandstill.

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GlobalEconomicOutlook–March2023

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Inflationprovessticky

Escalatinggeopoliticaltensions,ahardeningofcountry

borders,climatechangeandagingdemographicshave

combinedtomaketheeconomymoresusceptibletosupply

shocksandpronetoboutsofinflation.Core(excludingfood

andenergy)inflationmeasureshavebecomestickyand

moreresistanttoratehikesthanhoped.

Energypriceshavecomeofftheirhighs,whichshould

dampeninflation.Theconundrumtodayisthatitisfueling

consumerdemandelsewhereintheeconomy,whichis

settingafloorunderinflation.

Inflationintheservicesector,whichismoredependent

onthestrengthoflabor,acceleratedagainatthestartof

theyear,includingeverythingfromvacationstodoctor’s

visitsandaccountingformorethanhalfofallinflation.It

isrunningabove4%on3‑,6‑,and12‑monthmeasures‑‑

doubletheFed’sinflationtarget.

AchallengefortheFed

TheFederalReserveiscommittedtoderailinginflation,

whichrequiresachillingofdemand.MainStreetpickedup

atthestartoftheyear,withsmallerfirmsabsorbinghigh

profilelayoffsatlargerfirms.

ThechallengefortheFedistobalancetheneedtocoolthe

economywiththeneedforfinancialstability.Creditmarkets

arenowtighteningacrossmuchoftheeconomyevenas

financialmarketsfront‑runtheFedonratehikes.

Thattighteningofcreditconditionswearenow

experiencingisexpectedtohitsmallerfirmswithless

than250employees,residentialrealestate(builders)and

alargechunkofconsumerloanshardest.Thattightening

willeventuallyshowupinamoredramaticpullbackinboth

employmentanddemand.

TheFedwascommittedtocoolinginflationviaarisein

unemployment.Thegoalwastocontrolthatriseand

slowlyderailinflation,nottriggeradeepandmorescarring

recession.Thatisaveryfinelinetowalk.

Wehaveconsistentlyarguedthattheonethingthatwould

stoptheFedfromraisingratesisafinancialcrisis.Ifthe

regulatorshavetrulyavertedacrisis,thenratehikesshould

continuesothatinflationisderailed.Otherwise,theFed

risksstokingamorepersistentboutofinflation.Policy

uncertaintyandtheriskofadeeperrecessionjustrose.

DianeSwonk

ChiefEconomist,KPMGintheU.S.

GlobalEconomicOutlook–March2023

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Canada:Windingdown

tohitinflationtarget

ArecentdownwardtrendininflationsignalsthatCanadamayreachtheinflationtargetrangeof1‑3%byearly2024.

Canada’sresilientlabormarket,especiallyforskilledlabor,continuestosupporttheeconomy.

Akeydownsideriskresidesinthepotentialneedforfurthermonetarytightening;however,risksarenowmorebalanced.

Followingthe2021rebound,Canada’sGDPgrowthbegantoexperienceaslowdownin2022,inpartduetothetighteningofmonetarypolicythroughmostoftheyear.WhiletheestimatedGDPgrowthfor2022iscloselyalignedwiththeSeptember2022forecast,expectationsfor2023havebeenreviseddown,reflectingmoremutedgrowththanexpectedinQ42022,aswellaspossiblefurtherratesincreasesthisyear.

Thelabormarketremainsstrong,especiallyforskilledlabor,andwhileinflationexcludingmortgageservicingcostsisbackinlinewiththetargetrangeonamonthlybasis,coreinflationhasmoderatedfromitspeakbutstillremainshigh.OurmodelsshowcurrentmomentumispositivefortheCanadianeconomy,whichissupportedbyaresilientU.S.economyandanupwardrevisiontoChina’seconomicforecast,whichwouldsupportdemandforCanadianresources.

Table2:KPMGforecastsforCanada

202220232024

GDP

3.6

0.7

1.5

Inflation

6.8

3.6

2.2

Unemploymentrate

5.3

5.8

6.1

Source:StatisticsCanada,KPMGanalysis.

Note:Average%changeonpreviouscalendaryearexceptfortheunemploymentrate,whichistheaverageannualrate.

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