IMF expect global growth of 2.8% in 2023

The IMF trimmed its forecasts for global growth marginally in their latest assessment. The Fund now expects global GDP growth to be 2.8% in 2023 and 3% in 2024, both 0.1pp lower than the forecasts published in January. Advanced economies are expected to grow marginally faster, at 1.3%, up 0.1pp. In contrast emerging and developing economies are expected to grow 0.1pp slower than the previous forecast, at 3.9% in 2023. Global inflation is expected to be at 7% in 2023, 0.4pp higher than the level expected in the January forecasts, but lower than the 8.7% seen in 2022. The latest forecasts come on the back of comments made last week by IMF Managing Director, Kristalina Georgieva, suggesting medium term growth was likely to be around 3% over the next 5 years, its lowest level since 1990. The Fund’s latest forecasts also included an assessment that there was a 25% chance of global growth falling below 2% in 2023, a rate of growth only seen five times since 1970.  

The volume of retail sales in the Eurozone fell 0.8% m/m in February, consistent with expectations, as high inflation and tight financial conditions continue to weigh on households. Food and non-food sales fell 0.6% m/m and 0.7% m/m, respectively, while the volume of sales of automotive fuels fell 1.8% m/m.

Turkish Industrial production fell 6.0% m/m in February, significantly below consensus expectations for a 2% rise and below the 2% m/m growth seen the month prior. Underlying the headline figure were large declines in the mining and quarrying and manufacturing sectors, in large part due to the impact of the earthquake in early February.

Today’s Economic Data and Events

• 16:00 India Industrial production Feb. Forecast: 5.3% y/y
• 16:00 India CPI March. Forecast: 5.7% y/y
• 16:30 US headline CPI March. Forecast: 5.1% y/y
• 22:00 FOMC meeting minutes

Fixed Income

• US Treasuries dropped midway through the trading day yesterday though there was a modest pullback in yields toward the end of the day. Markets received mixed messages from Fed speakers overnight with John Williams of the New York Fed saying that the Fed’s dots plot, which implied one more hike from current levels, was a “reasonable starting place.” However, Chicago Fed president Austan Goolsbee said the Fed needed to be “cautious” with where rates go from here. The 2yr UST yield pulled higher by about 1bps to 4.0224% while the 10yr added about the same amount to 3.4262%.
• After a few days off thanks to public holidays European bond markets opened yesterday and dropped sharply. Bund yields rose by 13bps to 2.304% while the 10yr gilt yield added 11bps to 3.535%.
• Fitch affirmed their ‘BB’ rating on Oman but changed the outlook to positive from stable.

FX

• The dollar dropped against most peer currencies overnight as uncertainty on the near-term trajectory for rates weighs on the greenback. EURUSD added about 0.5% to close at 1.0912, making up for losses earlier in the week, while GBPUSD rose by 0.3% to 1.2424. USDJPY remains higher though as the prospects of tighter BoJ policy still appear remote. The pair closed at 133.68.
• USDCAD dropped by 0.3% to 1.3467 while AUDUSD also nudge higher, up by 0.2% to 0.6654. NZDUSD was the odd one out among commodity currencies, dropping 0.5% to 0.619.

Equities

• Asian equity markets trended up for the most part on Tuesday. The Nikkei was a notable gainer as it added 1.1%, boosted by the dovish tone struck by new BoJ governor, Kazuo Ueda, while the Topix added 0.8%. Meanwhile the Hang Seng ended the day 0.8% higher but on the mainland the Shanghai Composite dropped 0.1% as weak inflation data was suggestive of an economy in need of some stimulus.
• European markets came back from the Easter holiday with a spring in their step, with gains across the board. The CAC was the primary gainer as it closed 0.9% higher, lagged by the FTSE 100 (0.6%) and the DAX (0.4%).
• US indices were confined to a narrow range on Tuesday ahead of the crucial CPI print later today, with the S&P 500 closing almost unchanged while the Dow Jones added 0.3% and the NASDAQ dropped 0.4%.
• Locally, the DFM ended the day 1.0% higher while the ADX added 0.1%. In Saudi Arabia the Tadawul dropped 0.5%.

Commodities

• Oil prices pulled higher with Brent futures up 1.7% at USD 85.61/b and WTI added 2.2% to USD 81.53/b. The API reported a draw of 1.4m bbl in commercial crude stocks with official numbers out from the EIA later this evening.
• The EIA also estimated that oil markets will still manage a surplus in 2023 despite the cuts introduced from OPEC+. The agency also revised up their US production target for 2023 to 12.54m b/d, up by 100k b/d and anticipates WTI at USD 79.24/b this year.