US may avoid recession, Europe not so lucky

Morgan Stanley notes that next year, the economies of the UK and the euro zone could face a recession. However, a strong US labor market could help the country avoid a recession.

Investment bank analysts say China’s reopening after taking anti-COVID-19 measures for almost three years should boost its economy as well as those of other Asian markets. Reports forecast global economic growth of 2.2% next year, below the IMF's latest growth estimate of 2.7%.

Morgan Stanley predicts that next year there could be a sharp split between developed economies that are in or close to recession and emerging economies that are modestly recovering.

China's economy was predicted to grow by 5% in 2023. Thus, the Chinese economy could exceed the average economic growth of 3.7% expected for emerging markets. According to forecasts, average growth in the developed countries of the G10 will grow by only 0.3%.

In an effort to curb raging inflation, central banks in various countries have raised interest rates this year. Morgan Stanley has predicted that the Fed will keep rates high in 2023.

A report forecasting a GDP expansion of 0.5% next year says the US economy could avoid  recession in 2023. It will not be easy, mainly because of the constantly rising unemployment rate and slow growth in the number of jobs.

The report also says that the cumulative effect of tight monetary policy in 2023 will carry over into 2024. According to analysts, inflation should peak in the current quarter, while deflation will play a key role next year.