### Summary
Growing concerns about global economic growth and uncertainties in monetary policy have led to turbulence in financial markets, with rising bond yields and a decline in equity markets. Key factors affecting growth include interest rates, bond yields, and access to funds, which may result in a credit crunch and a more risk-averse environment in capital markets. China's shift towards self-sufficiency, combined with a more prudent policy environment, slower population growth, and trade sanctions, will lead to slower and more erratic growth in the country. Although there are near-term concerns, the longer-term outlook for global growth remains positive.
### Facts
- Global economic growth is a concern, reflected in rising bond yields and a decline in equity markets.
- Policymakers, particularly in the US, are worried about overtightening monetary policy.
- Western economies, including the UK, have proven resilient despite expectations of a recession.
- Lower inflation will boost spending power, but growth will depend on where interest rates and bond yields settle.
- Businesses face challenges in raising funds due to a credit crunch, tough lending conditions, and a risk-averse capital market environment.
- The International Monetary Fund forecasts global growth to slow from 3.5% last year to 3% this year and next, with Asia being a major driver.
- Concerns about deflation in China exist, but low inflation is more likely.
- China's shift towards self-sufficiency in response to trade wars has coincided with a more prudent policy environment and the need to curb inflation and manage debt overhang.
- A shrinking population and structural changes in China will result in slower and more erratic growth.
- Private sector activity remains strong in Asia, and Japan's economy is experiencing an economic rebound.
- Western economies previously experienced a prolonged period of cheap money, which led to imbalances and misallocation of capital.
- Prudent monetary policy in some emerging economies provides more room to act in response to economic weakness.
- Concerns exist regarding rising policy rates in the US, UK, and euro area and the tightening of central banks' balance sheets.
- The definition of a risk-free asset is being questioned, as government bonds, previously considered safe, have witnessed negative total returns.
- There has been a rise in shadow banking and non-bank financial institutions, with collateral in the form of government bonds playing a crucial role.
Overall, the focus is shifting from inflation to growth, and future policy rates may need to settle at a high level. High levels of public and private debt globally limit policy maneuverability and expose individuals and firms to higher interest rates.
Foreign banks are lowering their China forecasts due to signs of distress in the property sector, with missed payments by developer Country Garden and trust company Zhongzhi Group contributing to rising concerns.
Thailand's economy grew at a slower pace in the second quarter due to weak exports and slower investment, prompting the government to lower its 2023 growth forecast, while the central bank may not raise rates again amidst faltering economic recovery and low inflation.
China's big five state-owned banks are expected to see a decline in revenue and narrower net interest margins as they face challenges such as low credit demand and pressure to support the economy amid a debt crisis in the property sector.
Forecasters have decreased their growth expectations for China due to deflation, rising youth unemployment, and a property-market crisis, with GDP predicted to rise by only 5.1% in 2023 and 4.5% in 2024.
Chinese state-owned banks are expected to lower interest rates on existing mortgages, with the quantum of the cut varying for different clients and cities, in an effort to revive the property sector and boost the country's economy.
Economists at Nomura and Morgan Stanley raise their growth forecast for India's fiscal 2024 after the economy grew at its fastest pace in a year in the April-June quarter, while BofA Global Research cuts their estimates as quarterly growth falls below their forecast.
Forecasts for China's economic growth in 2023 and 2024 have been cut, potentially hindering the country's goal of becoming a "medium-developed country" by 2035 and surpassing the US as the world's No.1 economy.
Five major state banks in China, including ICBC and China Construction Bank, will lower interest rates on existing mortgages for first-home loans as part of support measures to aid homebuyers and stabilize the property sector.
Several international financial institutions have lowered their growth forecasts for China's economy below the government's target due to weak exports and a property crisis, posing a challenge despite Beijing's optimistic rhetoric.
China's economy is expected to grow less than previously anticipated due to struggles in the property market, leading economists to predict further downgrades and posing risks to both the domestic and global economy.
Britain's main manufacturing trade body has lowered its growth forecast for the sector due to a decline in factory output and economic uncertainty, with expectations of a 0.5% fall in output in 2023 and a growth of only 0.5% in 2024.
The Organisation for Economic Cooperation and Development (OECD) has lowered its forecast for global economic growth in 2024 to 2.7%, while predicting inflation to remain above central bank targets despite interest rate hikes; fears of a slowdown in China and reduced growth in the US contribute to the pessimistic outlook.
The Asian Development Bank has lowered India's GDP growth forecast for FY 2023-24 to 6.3% due to the impact of extreme rainfall patterns on agriculture, while maintaining a growth projection of 6.7% for FY 2024-25, citing corporate profitability and strong bank credit as key factors. Additionally, the bank expects inflation to moderate and retail sales to be affected by food inflation, while India's external trade is expected to be affected by weak global demand. Despite these challenges, India's GDP growth outlook remains higher compared to its Asian peers.
ING Bank has lowered its economic growth forecast for the Philippines to 4.8 percent due to increased inflation and potential interest rate hikes by the central bank, which may hamper GDP expansion in the second half of the year.
The growth forecasts for Malaysia, the Philippines, Singapore, and Thailand have been downgraded due to declining exports to China and other factors, according to a survey by the Japan Center for Economic Research and Nikkei.
The World Bank has lowered its growth forecast for China next year and warned of slow expansion, leading to concerns about global economic growth, despite European markets and FTSE 100 being up on Monday morning in London.
China's growth is expected to slow down in 2024, with the World Bank attributing the gloomy outlook to a slowdown in China, weak indicators, stagnant house prices, increased household debt, and trade tensions with the US.
The World Bank has raised its forecasts for Sri Lanka's economy, expecting growth of 1.7% in 2024 and a smaller contraction of 3.8% this year, citing progress in reducing inflation and increased tourism revenue, but also cautioning about significant uncertainty and downside risks.
GDP growth in developing East Asia-Pacific is projected to be the worst in almost 50 years, with the region expected to grow by only 4.5 percent in 2024 due to persistent domestic difficulties in China and external factors.
China's economic growth this year may be as low as 2 percent, half of what the International Monetary Fund predicts, due to problems in the property sector, weak foreign direct investment, and other structural issues, according to Daniel Rosen of the Rhodium Group. The IMF has forecasted 5.2 percent growth for China, but Rosen believes growth above 3 percent is unlikely in the medium term. Additionally, concerns are rising that China's economic challenges could hinder global growth.
The ASEAN+3 Macroeconomic Research Office has revised Vietnam's 2023 growth forecast to 4.7%, but it falls below other organizations' projections.
Rising debt levels in seemingly healthy countries in Asia could lead to lower growth rates in the region, according to World Bank Chief Economist Indermit Gill. The increased borrowing by governments will limit credit available to private firms, resulting in a lack of investment and potential economic stagnation.
China's weak economic recovery and the risks associated with its property crisis are likely to impact Asia's economic prospects, according to the International Monetary Fund (IMF), leading to a cloudier outlook for the region and potential spillover effects on commodity-exporting countries with close trade links to China. The IMF revised its growth estimate for Asia down to 4.2% for 2024, and emphasized the need for central banks in the region to exercise caution in cutting interest rates due to sticky core inflation and other global factors such as the Middle East conflict. Additionally, the IMF warned that Japan's normalization of monetary policy could have significant global implications.
China's economic growth forecast for next year has been downgraded by the World Bank due to persistent difficulties such as elevated debt, property weakness, and an aging population.
The IMF downgraded its growth forecasts for China, citing a weakening property sector and expects China's GDP to decline by as much as 1.6% relative to the baseline by 2025, while world GDP would decline by 0.6%.
