As per latest survey by IMF, inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis post Russia-Ukraine war has been less severe than initially feared. Though global economy still faces major headwinds in 2023, global growth is now expected to fall from 3.4% in 2022 to 2.9% in 2023 (vs 2.7% projected earlier). The road to full recovery with sustainable growth and stable prices has just begun and the risks appear to be more tilted towards downside.
On the back of some improvements in macro-economic conditions globally, stock markets continued their upward momentum in the last few months, delivering one of best openings to a calendar year since beginning of 2020 wherein almost all the global markets were in positive territory with many of the key indices in US and Europe delivering a return between 7-15% since the start of 2023.
Urban consumption led by higher discretionary spending in services like Travel and Tourism, healthy investment activity with bank credit expanding by 16.7% upto Jan 2023, governments enhanced focus on infra spend resulting in healthy capacity utilisation of ~75% across industries and normal monsoon + better crop prices which should result in improving rural demand are some of the major drivers which should support healthy economic activity in 2023-24.
“We feel that SVB’s slide into the abyss isn’t quite a Lehman moment but a warning sign that we have trouble in the banking system, built up through the years of free-spending, i.e., money printing at the Federal Reserve,” says Arpit Shah, Co-Founder & Director at Care Portfolio Managers Private Limited.
In an interview with ETMarkets, Arpit Shah at Care PMS, with 15 years of experience in Capital Markets, which manages Rs 500 Cr of AUM through its 2 strategies, said: “During Lehman crisis, interbank lending had dried up as the assets they were holding had witnessed huge loss in value”
The U.S. economy and stock market continued to struggle in the quarter gone by. Economic uncertainty may have peaked in 1st half of 2022 but it still remains high. US stock markets continue to feel the weight of Federal Reserve policy tightening, shrinking market liquidity and slower economic growth and were down by ~25% as of Sept 2022, their worst performance since 2002.
The world’s 2nd largest economy is facing a series of headwinds including protracted COVID curbs, global recession risks impacting exports and a property downturn. The effects are yet to be seen as the government tries to revive economy and give support to the struggling property sector.
Inflation, which is the center point of concern has started to decline with October data showing lowest inflation figures since Jan 2022. This has resulted in hopes of Fed reducing its aggressive tightening policy as early as Dec when the odds for a 0.5% rate hike have increased significantly.
As per Reuters, growth seems to have likely slowed to 6% in 3rd quarter vs 13.5% in 2nd quarter. However, India still continues to be the fastest growing economy in the world.