The Fed’s Soft Landing’s in View. Why Russia, Saudi Arabia May Crash It.

The success of the global economy in the coming months rests heavily on the ability of the US Federal Reserve to achieve a "soft landing" in managing growth-inflation dynamics, as many other major economies are facing their own challenges and cannot serve as alternative engines for global growth.

Saudi Arabia's robust diversification efforts, driven by Vision 2030 strategies, have resulted in a surge of business activities and economic growth, despite worldwide economic uncertainty and concerns over inflation and geopolitical tensions. The country's economic diversification journey has led to the opening of new sectors and advancements in fields such as tourism, media, finance, and clean energy, making it a regional economic and technology hub. Saudi Arabia's continued focus on sectors like mining, metals, hospitality, tourism, and clean energy, along with fiscal consolidation efforts and revenue-enhancing measures, are key to sustaining its economic diversification model.

The economy is experiencing a soft landing, but the long-term consequences of easy money policies are still uncertain, with bankruptcies and a potential shakeout in office real estate looming.

The U.S. economy may achieve a soft landing, as strong labor market, cooling inflation, and consumer savings support economic health and mitigate the risk of a recession, despite the rise in interest rates.

Analysts predict that Saudi Arabia may face an economic contraction in 2023 due to its decision to extend crude production cuts, highlighting the nation's heavy reliance on oil, while a large dividend from Saudi Aramco may provide some cushion for public finances.

The price of oil is surging as Saudi Arabia and Russia cut output, creating a supply deficit that is driving up prices and threatening a fragile global economy with inflation and potential interest rate hikes.

Treasury Secretary Janet Yellen and Goldman Sachs may be optimistic about a "soft landing" scenario for the US economy, but the author remains skeptical due to factors such as a deeply inverted yield curve, declining Leading Economic Indicators, challenges faced by the consumer, global growth concerns, and the lagging impact of the Fed's monetary policy, leading them to maintain a conservative portfolio allocation.

The United States is in regular contact with Saudi Arabia to ensure a stable and affordable supply of energy to global markets, according to National Security Advisor Jake Sullivan. This comes as cuts in oil output by Saudi Arabia and Russia are expected to result in a significant market deficit.

Despite economists' hopes for a "soft landing" of the economy, signs such as inflation and uncertain variables make it difficult to determine whether the U.S. economy has achieved this outcome.

The economic data in aggregate suggests that the US economy is on track for a soft landing in 2024, with the Federal Reserve successfully slowing down economic growth and achieving its target inflation rate, despite concerns from the bear camp.

Federal Reserve Chair Jerome Powell indicates that while policymakers project a "soft landing" for the US economy, he does not confirm it as a baseline expectation due to external factors beyond their control such as the autoworker strike, government shutdown, and higher borrowing costs.