The estimated global growth of close to 3 percent for 2023 is a significant achievement, particularly given the initial growth expectation of 2.1 percent. Importantly, the better-than-expected performance was broad-based, affecting all major economies, including the US, the Euro area and China, Qatar National Bank (QNB) said in its weekly commentary.
In this article, QNB dived into three key drivers of 2023, First, US growth proved to be significantly more robust than previously anticipated. With growth estimated to close at 2.4 percent for the year, the US economy has even re-accelerated from last year, when it ran close to its long-term trend at 2 percent. This took place despite the continuation of aggressive monetary policy tightening by the US Federal Reserve (Fed) throughout most of the year, which led the policy rate to the current 5.5 percent level.
QNB added that robust consumption, in particular, which represents around 70 percent of the countrys GDP, helped to explain the US economic performance. US households are still benefiting from strong balance sheets, high levels of financials savings available for spending, and healthy income growth. As most US households re-financed their obligations at record low interest rates during the immediate post-pandemic period, they are mostly sheltered from the ongoing financial tightening. Therefore, consumption created a strong baseline for US GDP growth.
While the second factor is related to the Euro area, growth sharply slowed from a strong showing in 2022, a deep recession was avoided. The energy crisis proved to be less severe than previously anticipated, due to a mild winter, more effective energy saving mechanisms, and the accumulation of high energy inventories from the previous summer.
The report pointed out that fiscal policies remained loose to support higher subsidies and direct transfers to more vulnerable industries, households, and regions. Moreover, the European Central Bank (ECB) continued with its two-pronged policy of tightening rates to fight inflation while reallocating quantitative tools to provide a backstop to highly indebted Euro area sovereigns, particularly in the southern part of the continent. This provided further financial stability, preventing the existing stagnant conditions from deteriorating into the sharper downturn that most analysts feared in the beginning of the year.
Regarding the third factor, the report indicated that after a 2022 of subdued activity and "stop-and-go" Covid prevention policies, China fully re-opened this year. China also gradually started to pivot away from restrictive fiscal and monetary policies, a tightening of the real estate sector and the regulatory clampdowns across industries. Taken together, and despite some persistent negative sentiment amongst Chinese businesses and households about the economy, these pivots provided a partial re-igniting of activity in the country, leading to moderate growth of 5.2 percent in 2023, above the early consensus of 4.8 percent. (QNA)
