2023 is a difficult year for the West. Due to the rampant inflation, the main central bank's tightening of monetary policy has far exceeded previous expectations.Although the interest rate level is very high, both the United States and the euro zone avoid recession.
As far as the United States is concerned, the growth of GDP (GDP) in 2023 is finally close to potential levels (estimated to 2.4%).Considering the banking problem experienced at the beginning of last year, this number is impressive.
The European Union has a poor performance (estimated to be 0.5%), but it has suffered a greater impact, because after the invasion of Ukraine in Russia, the EU reduces its dependence on Russia's natural gas and has to deal with huge energy costs.
China and other parts of Asia
Compared with the good expectations brought by the comprehensive relief of crown disease prevention and control measures, the growth of China's economy is disappointing.
At the same time, the performance of other Asian countries is far better than expected, although they are increasingly close to China.
It is not only the well -known growth and stock market in India, but also Japan.Like most countries in Southeast Asia, Japan's economic growth has exceeded the potential level.The backward is information, communication technology and semiconductor exporting countries, especially South Korea, Taiwan and Vietnam, because the inventory cycle has been topped.
In terms of inflation, the situation in Asia is also quite special, because its inflation is better controlled.China is an extreme example. It appeared in consumer prices at the end of last year, and the wholesale price decreased significantly.This, coupled with capital control, enables the Central Bank of China to reduce interest rates slightly in accordance with its needs in terms of monetary policy cycle, rather than raising interest rates like other central banks in the world.
Another exception is also in Asia, that is, Japan, but the situation is different: because the inflation rate exceeds 3%and wages are stagnant, the Bank of Japan has been delaying the pace of negative interest rates, resulting in a weak yen in a record.
Western economies can avoid hard landing
In 2024, as the anti -inflation force that has existed for several months continued to play a role, the situation in the West would be very different.The United States and the euro zone achieved inflation targets by the end of 2023. Therefore, even if economic performance is ultimately stronger than expected, it should not change much about the rapid fall of inflation.
Despite the conflict of Gaza, the global energy situation has been greatly eased, and China's export price continues to grow negative growth. Therefore, the power to suppress inflation is strong and ingrained.This means that the Federal Reserve and the European Central Bank should have enough space to cut interest rates rapidly. In the first quarter, it may cut interest rates of 150 basis points, and the second quarter may reduce interest rates of 125 basis points.
The reduction in financing costs should help avoid hard landing in the Western economy. At the same time, as the inflation rate decreases and actual disposable income increases, the home purchasing power will also be restored.
China and Japan will slow down
In short, the US economy will still slow down, which may fall to half of the strong growth in 2023, that is, about 1.2%.As far as the euro area is concerned, the growth rate should be faster than 2023, which is equivalent to the United States.
Due to the limited fiscal and currency support, the Chinese economy will continue to grow slightly higher than 5%in 2023, slowing to less than 5%(according to our forecast is 4.5%). ThereforeCopy in other parts of Asia.
On the contrary, India will continue to shine with a 6.5%growth rate of 6.5%in 2024.With the end of the inventory cycle, countries that are affected by information, communication technology and semiconductor cycles will also improve this year.
However, with the long -term super loose monetary policy of the Bank of Japan, it will be difficult for Japan to maintain a growth rate of 2023 (estimated to 1.6%).
In short, while China's economy slows down, other Asian countries will perform well.This shows that although the integration of Asia is high, the performance of various countries is different.
In view of the significant decline in the Fed's interest rates and the slowdown in the US economy, the US dollar exchange rate will weaken in 2024, until 1 euro against about $ 1.13.As the Bank of Japan is expected to withdraw a negative interest rate policy in mid -2024, the impact of this trend on the yen should be more extreme.
RMB will be difficult to follow the pace of appreciation of the euro or other Asian currencies, because China's economy needs to continue to rely on external needs to achieve growth.This also means that exports need to be supported (because even if the currency is depreciated and the export price is negative, the exports in 2023 have almost no increase).In order to provide such support, it is difficult to imagine that the renminbi will be allowed to strengthen quickly.
Emerging markets in Asia will perform well
In general, due to the continuous rapid anti -inflation process, 2024 will be a year when the key policy interest rate of the Western Central Bank will begin to decline.Except for other factors, the growth of actual revenue should help the US economy soft landing; and the economic growth rate should be higher than last year after the euro zone getting rid of the energy crisis.China will continue to slow down slowly and steadily, while other emerging markets in Asia will perform well.
In other words, with the normalization of monetary policy, the growth and inflation in the West will become consistent.As other growth engines appear in emerging Asian markets led by India and Asia, the economic performance of Asian countries will be very different.
There is no doubt that this situation will be affected by several risks in the West and the East.The most obvious is geopolitics, because there are two wars (Ukraine and Gasha) in 2023, and it does not seem to end quickly.
Asia itself may have more risks, which can be the result of the election of Taiwan or the problem of the South China Sea; the tension between China and the Philippines is the most obvious example.
In addition to geopolitical factors, while avoiding economic recession, the process of suppressing inflation may not be maintained. The continuous management of China's related issues related to real estate or the risks brought about by the poor fiscal conditions of local governments cannot guarantee that it will work.
The author is the chief economist of the Asia -Pacific region of France, a senior researcher at Bruegel, a senior researcher in the BruEgel, and the East Asia Research Institute of the National University of Singapore.
Original Lianhe Morning Post's English Electronic Magazine Thought China (ThinkChina)
Golden Shun Translation
