Tommy Patrio Sorongan, CNBC Indonesia
Wednesday, 11/15/2023 21:24 IWST
Photo: Goldman Sachs (REUTERS/Brendan McDermid)
Jakarta, CNBC Indonesia – Goldman Sachs expects the global economy to outperform expectations in 2024. This is driven by strong earnings growth and confidence that the worst of rising interest rates is over.
The investment bank estimates that the world economy will grow by 2.6% next year on an annual average. This is above the consensus estimate of 2.1% of economists surveyed by Bloomberg.
Goldman also believes that most of the headwinds caused by tightening monetary and fiscal policies are over. According to him, policymakers in developed countries will not lower interest rates before the second half of 2024 unless growth is weaker than expected.
The financial institution also noted that inflation also continues to decline in all G10 countries and developing countries, and is expected to continue to decline.
“Our economists expect this year’s decline in inflation to continue in 2024: sequential core inflation is expected to fall from the current 3% to an average range of 2-2.5% across the G10 (excluding Japan),” wrote the Goldman report as reported CNBC InternationalWednesday (15/11/2023).
The investment bank also expects global factory activity to recover from the recent slump as existing headwinds ease this year. Goldman noted global manufacturing activity has been weighed down by China’s weak manufacturing recovery and Europe’s energy crisis.
“Our economists have a positive view of real income growth at a time when headline inflation is much lower and the labor market remains strong,” wrote Jan Hatzius, chief economist at Goldman.
“We continue to see limited recession risks and reaffirm the probability of a United States (US) recession at 15%.”
In September, the bank had cut its US recession forecast from 20% to 15% on the basis of easing inflation and labor market resilience.
Although rising interest rates and fiscal policies will continue to weigh on the growth of G10 countries, Hatzius believes that the worst of the “headwinds” are over.
“Both the Euro area and the UK are expected to experience a meaningful acceleration in real income growth to around 2% by the end of 2024 as the gas shock after Russia’s invasion of Ukraine fades,” he added.
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