Recession risks have eased, but tight financial conditions and China’s struggles are expected to slow global growth through 2024, Moody’s Investors Service says.
In a new report, the rating agency forecast that real GDP growth for the G20 will slow to 2.5% this year from 2.7% last year, and slide further to 2.1% in 2024, as interest rates remain high in the year ahead.
“Major central banks will maintain a restrictive policy stance through 2024,” Moody’s said, as both growth and inflation have remained elevated in the face of higher rates this year.
While the threat of a U.S. recession has receded — Moody’s raised its 2023 forecast to 1.9% from its previous call of 1.1% — it also noted that weak output is needed for inflation to “sustainably decline.”
“Elevated core inflation means central banks cannot be certain they have achieved their inflation mandates just yet,” it said.
Eventually, high rates are expected to curb growth enough to also subdue inflation, Moody’s said.
As a result, it sees annual growth in the U.S. slowing to just 1.0% in 2024.
However, there are upside risks to inflation from spiking commodity prices and persistent demand, it cautioned.
At the same time, Moody’s lowered its growth call for China in 2024 to 4.0% from 4.5%, citing its myriad economic challenges.
“This expectation assumes a stabilization and turnaround of economic indicators with modest support from authorities,” it said. “We recognize, however, that there are significant downside risks to growth and that policy measures may prove inadequate to prevent further deterioration.”