A U.S. think tank said on Tuesday that a soft landing for the global economy is likely but not assured, projecting a 3-percent global GDP growth in 2023 and a 2.8-percent growth in 2024.
“While inflation appears to be receding in most countries, it remains decidedly above central bank targets,” Karen Dynan, nonresident senior fellow at the Washington, D.C.- based Peterson Institute for International Economics (PIIE), said at a virtual press briefing presenting the Fall 2023 Global Economic Prospects.
“As a result, most central banks will need to keep their policy rates high over the coming year, with the resulting tight financial conditions holding back demand and slowing economic activity,” she said.
However, she noted, most countries will experience below-trend-but-positive growth as inflation moderates, not recessions.
For the U.S. economy, Dynan forecast that the U.S. real GDP growth will remain below its potential level throughout next year, moderating from 2.2 percent this year to 1.6 percent in 2024, noting that higher interest rates will dampen growth momentum going forward.
Economic activity appears to have accelerated in the third quarter of 2023 but should see a lull in the fourth quarter owing to the strike by the United Auto Workers, restart of student loan payments, and a probable government shutdown, she said.
On auto strike, it does depend on how long it persists, Dynan said in response to a question from Xinhua. “It’s the end of the third quarter, it will put us on a soft starting point for the fourth quarter. So I think that is also going to chip away a bit of GDP growth.”
“For households who have to make student loan payments, we’re talking a sudden hit to their disposable income of something on the order of probably on average a couple of hundred dollars,” Dynan said.
PIIE projects euro area real GDP growth to be 0.6 percent in 2023 and 1 percent in 2024. It projects that China’s real GDP will grow 5.1 percent in 2023 and 4.5 percent in 2024.