International Monetary Fund(IMF) has warned of a global recession in 2023!đŸ¤¯
Major economies across the world are facing a lot of headwinds!
How is India doing?
Will India also face problems?
A threadđŸ§µanalyzing the growth prospects of the world
Lets go!đŸ‘‡
IMF outlook:-
The International Monetary Fund will next week downgrade its forecast for 2.9% global growth in 2023,Managing Director Kristalina Georgieva.
Georgieva said the outlook for the global economy was "darkening" given the shocks caused by the COVID-19 pandemic,
Russia's invasion of Ukraine and climate disasters on all continents
IMF says all of the world's largest economies -
Europe,
China and
the United States -
are now slowing down,
"And, even when growth is positive, it will feel like a recession because of shrinking real incomes and rising prices,".
So how are Major economies across the World Doing?
Europe:-
Energy Crisis:-
Russia accounts for 40% of Natural Gas consumption for Europe.
Russia supplies Gas to Europe thru various pipelines.
Gazprom which is a Russian entity supplies Gas to Europe
As the Russia-Ukraine war has gone on.
Gazprom has tried to cut supplies to Europe at will.
Nord Stream 1 pipeline has seen many maintenance shut-down since the war!
Super High electricity prices:-
In many economies in Europe like Germany and UK
Electricity prices are up 5-10x.
Wasting electricity is strictly prohibited now.
Europe Recession is inevitable
Inflation reaches 10% in Germany.
Germany says they are in an Energy war with Russia.
Natural Gas prices creating Havoc in Germany
Germany officially says it will be in a recession in 2023.
First G-7 country to accept a recession.
Growth expectation for Euro-Zone in 2023.
-0.4%.
Every Major economy in the Eurozone will contract.
United States:-
For far too long the US Fed called Inflation "Transitory"!
The Effect?
Now we see the steepest Interest rate hike cycle in the last 35 years!
The US Fed in repeated statements has made it clear:-
Inflation is running way to hot for comfort.
Interest rates could move upto 4.5%
This means the rate hikes could continue.
The Fed will slow down demand to kill Inflation
Mortgage rate rise to record levels slowing down demand:-
30-year Mortgage soared to levels last seen in 2007.
The affordability of houses is at its lowest in a decade.
United States:-
For far too long the US Fed called Inflation "Transitory"!
The Effect?
Now we see the steepest Interest rate hike cycle in the last 35 years
The US Fed in repeated statements has made it clear:-
Inflation is running way to hot for comfort.
Interest rates could move upto 4.5%
This means the rate hikes could continue.
The Fed will slow down demand to kill Inflation
Mortgage rate rise to record levels slowing down demand:-
30-year Mortgage soared to levels last seen in 2007.
The affordability of houses is at its lowest in a decade.
Yield Curve inversion:-
The Us yield curve is now inverted.
It has been this steeply inverted since 1980s
This means the markets are worried about a recession more than ever.
Strong Parameters mean even more pain:-
Some parameters like Job markets are as strong as ever.
Inflation numbers are not easing off.
This means even more pain from the US Fed...the rate hikes will be even more aggressive.
So all in all the US Fed is giving the message:-
The US is only concerned about Inflation.
There will be massive rate hikes
Now it seems Recession is a matter of "when" and not "If"
China:-
The dragon is slowing down.
Zero Covid is wreaking havoc
Covid outbreaks in several cities, including manufacturing hubs like Shenzhen and Tianjin,
have been hurting economic activity across industries.
China's property market crisis:-
Weak real estate activity and negative sentiment in the housing sector has undoubtedly slowed growth.
Home buyers have been refusing to make mortgage payments on unfinished buildings and some doubt their houses will ever be completed.
Demand is down for new homes and that has reduced the need for imports of commodities used in construction.
Despite Beijing's efforts to prop up the real estate market, home prices in dozens of cities have declined by more than 20% this year.
Banks have slashed the Chinese growth outlook to nearly 4% for 2023.
Lowest in possibly a decade.
The Rise of the Elephant!
India
The Indian economy is as strong as ever:-
From 2018-2021 the Indian economy sharply slowed down due to
1. IL&FS crisis.
2. Yes Bank+DHFL crisis
3. Covid ran havoc in the economy.
2022:-
As all of these problems are behind us
We now have:-
1. Lenders with a clean balance sheet
2. Government ready to spend massively in the economy
3. Private sector capex is coming back
4. Demand is ready to come back
What does this mean?
Growth projections for India will be at 6.5%
India will become the fastest-growing economy in the world.
The domestic economy is stronger than most other economies Manufacturing moving to India will only add to the upside
Conclusion:-
Europe is now guaranteed a Recession
US is also writing a Recession with steep rate hikes.
China is all set to grow at its slowest in a decade!
India will be the only economy in the world to grow at 6%.
Will a global Slowdown affect India?
The world is interlinked!
Yes,A global Slowdown will mean India will also slow down.
But with the domestic economy doing better than most economies.
India will ride the global slowdown better than most countries.
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