Bullishness about the global economy has been lacking among business leaders in recent months, with fears of a recession clouding outlooks and limiting investment. Now cautious optimism does by browsing.
That’s largely thanks to China, whose sudden lifting of strict coronavirus restrictions late last year is expected to trigger a wave of spending that could offset economic weakness in the US and Europe.
“China’s reopening should be the main event and will be the main driver of growth,” said Laura Cha, head of Hong Kong Exchanges and Clearing. He said this at the World Economic Forum held in Davos, Switzerland on Tuesday.
That’s an assessment shared by a large number of people attending the annual gathering of executives, billionaires and politicians in the Swiss mountain resort, in contrast to a WEF survey of chief economists published on Monday that showed two-thirds of them. I think there will be a recession in 2023.
S&P Global Chief Executive Douglas Peterson said China’s more relaxed approach to the coronavirus – after three years of strict lockdowns, closed borders and aggressive… test – global offset will help pain
Peterson said, adding that he expects “net growth globally this year,” adding, “There’s cleared savings, there’s increased demand, so we expect China to see very strong growth, especially as you get to the end of the year.”
China’s zero Covid policy has impacted global growth in 2022. The world’s second-largest economy expanded just 3%, one of its worst performances in nearly half a century. But Liu He, the country’s vice-premier, said in a keynote address in Davos on Tuesday that the country’s reopening would lead to a revival in activity and economic growth.
“If we work hard enough, we believe that in 2023, China’s growth will likely return to its normal trend and China’s economy will improve significantly,” Liu said.
Quantifying the expected growth remains difficult. China is in the grip of its worst coronavirus outbreak in recent weeks, locking down many people and emptying shops and restaurants in recent weeks. Future waves may have a similar effect. (Liu said on Tuesday that the Covid situation is “stable”.)
Spending by Chinese consumers and businesses could also reignite inflation if demand for fuel and agricultural goods rises sharply.
However, for many, the changing situation in China is a bright spot.
“I expect solid growth for China in 2023,” said Kevin Rudd, president of the Asia Society and former prime minister of Australia.
Those seeking to send a similar message also point to a warmer winter in Europe, which has eased fears of an energy supply crisis and boosted confidence that US inflation has peaked.
“I think the economy surprises us quarter after quarter,” European Central Bank Governor Mário Centeno said Tuesday of the situation in Europe. “Maybe in the first half of the year we will be surprised.”
And avoiding a global recession is not a done deal.
In addition to uncertainty about exactly how China’s reopening will look, questions remain about how much central banks will raise interest rates, how long they will keep them there, and how much economies like the U.S. will eventually slow.
Russia’s war in Ukraine is another ongoing source of instability. Europe’s ban on Russian diesel comes into effect next month, threatening to keep prices of the vital fuel at an extraordinarily high level.
As inflation eases, Christian Ulbricht, CEO of commercial real estate giant JLL, told CNN he’s worried about where it will settle — especially given the trend to bring supply chains closer to home, which could reduce companies’ exposure to geopolitical influences. risks, but increases their costs.
If inflation stays between 4% and 7%, “it will be painful for many industries,” he said.
The World Bank warned earlier this month that any new shock — such as an unexpected spike in inflation or a central bank policy blunder — would likely trigger a second recession this decade.
– Juliana Liu contributed reporting.