A toxic policy mix in 2024? The Eurozone is heading into a challenging 2024 with both fiscal and monetary policy turning restrictive as real rates turn more limiting and governments tighten their belts.
Germany is the only major economy that looks set to contract in 2023, with headwinds such as slowing demand for its exports , lopsided global growth in services over goods, the industry slowdown in the US and China and an inventory correction.
Global GDP growth is projected to decelerate to +2.5% in 2023, as low as in 2019. Advanced economies will likely dodge a full recession but will experience low growth in 2023 and 2024.
2022 flipped the script on the traditional 60/40 portfolio split, with inflation and growth dynamics switching the traditionally negative correlation between equities and bonds into a positive one.
An initial ‘back of the envelope’ calculation suggests that the recent heatwave across the United States, Southern Europe, and China may have cost 0.6pp of GDP in 2023. The cost ranges from 0.1pp for France to 1.3pp of GDP for China.
