Moody’s Anticipates Steady Yet Slower Economic Growth

Global economic growth will slow down but remain steady, said Ariane Ortíz-Bollin,  Senior Credit Officer, Moody’s, during the rating firm’s conference day. 

“While there has been an economic boost due to stabilization after the pandemic, it still has some lingering effects on the global economy”, says Ortíz-Bollin. She emphasized the importance of considering the significant pent-up demand that is currently sustaining the economy.

The growth in global economies is attributed to a post-pandemic rebound, as consumers who were previously unable to shop are now able to do so. In the US, consumer confidence remains strong but a slowdown is already noticeable. Moody’s has revised the growth outlook for the US, now expecting a rate of 1.9% for the country. However, the rating firm warns of an anticipated slowdown in 2024, particularly in larger economies like China. 

For G-20 Emerging Markets (EM) and Advanced Economies (EA), Moody’s projects growth rates are 4.3% and 1.4%, respectively, by the end of 2023. For 2024, EM is projected at 3.7% while EA growth is expected to hit 1.0%. 

Mexico, Turkey and Brazil have surprised experts with higher-than-expected growth rates. Mexico’s GDP rose from the expected 2.4% to 3.3%, with a projected rate of 1.9% for 2024. Brazil is expected to have a growth rate of 1.5% and Turkey 2.6%. Other countries with higher projected growth for 2024 include Colombia, Peru, Chile and South Africa. 

In terms of inflation, emerging markets have seen faster declines compared to advanced economies. Most economies have inflation above their targets. For example, Colombia has a general inflation rate of 11% with a 3% target from its central bank, the UK has a 7% inflation rate and a 2% target, while India has a 7% inflation rate with a 4% target. 

Regarding monetary policy, the US is not expected to cut rates until April next year, which is expected to impact policies in other countries like Mexico and Brazil. Mexico has a reference rate of 11.25%.

In Mexico, the economy has been supported by consumption, industrial strength and investments. In 1H23, private investment rose by 113.2% and public investment increased by 80%.