EICN Executive Insight Q2 2023

By Weisi Xie, Shanghai director

During the EICN Executive Insight Q2 2023 webinar on Thursday last week, we shared with you our analysis on recent macro trends, with a specific focus on Asia and China. At the beginning of the webinar, I also briefly talked about the EIU’s latest global outlook with updated forecasts of key economic indicators. The key points can be summarised as the following:

  • The EIU expects global economic growth to slow in 2023, reflecting persistent headwinds stemming from the ripple effects of the war in Ukraine, as well as high inflation and rising interest rates. Our forecast for global growth stands at 2.2%, up from 2.1% last month. This upward revision reflects improvements to our 2023 growth forecasts for China, as well as for many European economies (including France, Germany and the UK).
  • We forecast that the Chinese economy will grow by 6.1% in 2023 (up from 5.7% previously). The recovery will be consumer-led, as the exit from the country’s zero-covid policy has unleashed pent-up demand for goods and services.
  • The euro zone avoided recession in the winter of 2022/23, owing to low energy demand amid mild temperatures. However, high inflation continues to weigh on spending—we forecast GDP growth of just 0.8% in the bloc this year.
  • We expect global growth to remain subdued in 2024, at 2.5%. Growth in OECD economies will be particularly tepid, at a forecast 1.5%. By contrast, we forecast an expansion of 4.1% in non-OECD economies.
  • Inflation was a major driver of all our forecasts in 2022, and this will continue to be the case in 2023-24. We expect major central banks to end their tightening cycles by mid-year as inflation slows, but rates will remain high in 2023-24. Despite sky-high interest rates, global inflation will subside only gradually, from an estimated 9.2% in 2022 to 7.2% in 2023 and 4.6% in 2024. Prices will remain high in level terms, especially for food staples, fueling the risk of social unrest.
  • Oil prices will remain high in 2023-24, owing to continued disruption from the war in Ukraine, OPEC+ production cuts and rising Chinese demand. We expect oil (dated Brent Blend) to trade at more than US$75/barrel until 2025.
  • Benign environment of pre-2018 is now gone. Geopolitics are imposing higher costs and playing a bigger role in global economy. Era of ultra-low interest rates is also gone, with implications for funding for companies and financial markets. Tough decisions (large-scale lockdowns, trade openness, interest rates, etc.) highlight importance of good governance.

EICN members can access EIU’s up-to-date forecasts of these data points using the EICN Asia Data Tool. Reach out to your account manager if you want to learn how to access this tool.

When it comes to the city that we live in, the Shanghai Central Meteorological Observatory just issued this year’s first yellow high-temperature warning that the maximum temperature of downtown and several suburb areas is expected to exceed 35°C today. This yellow warning signal comes almost one month earlier than that of 2022. According a series of recent studies by scholars from the Chinese Academy of Sciences, this upcoming summer is almost doomed to feature record-breaking extreme temperature, not just in China, but across the globe. The implications for energy supplies and green transitions for all countries in the world will be significant.

Join our Shanghai professional network

To learn how to gain access to exclusive EICN events that offer actionable insights, high-level networking and opportunities for thought leadership, please click on the button below.