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1、Global Economic OutlookGlobal Economic OutlookDecember 2023home.kpmg/globaleconomicoutlookGlobal Economic Outlook December 2023IntroductionA theme thats become all too familiar in KPMGs Global Economic Outlook is uncertainty.For many,2023 was another year when the medicine at times felt worse than t
2、he illness.Central banks tightened their belts with tough monetary policies aimed at reigning in spiralling inflation.It appears to have paid off,but at the cost of economic stagnation for many regions and a continued squeeze on consumer spending.KPMGs latest Global Economic Outlook offers a sense o
3、f what lies ahead,with the clear health warning once again that were in deeply uncertain times,and therefore our predictions are just that a forecast based on the few certainties that exist right now and the long-term trends that can help us piece together a complex future.I spent the final month of
4、 2023 in Dubai,joining delegates at COP28.The summit was focused on the climate crisis and potential solutions that could unlock a more sustainable future,but for me it reflected some of the wider challenges facing economies and political leaders right now.There were some positive outcomes,but many
5、issues remained unresolved.The economic outlook is worryingly similar.In our latest report,our economists based around the world offer their view on the economic landscape in the coming months and years.While the story varies from country to country,there are some clear universal themes.Monetary pol
6、icy has had a big impact on output and growth prospects and theres growing pressure for it to ease.Whether that happens remains to be seen.Many central banks are stuck between a rock and a hard place,cautious that loosening the screws could simply lead to an inflationary rebound.There are also fears
7、 that an increasingly protectionist,de-globalization approach in politics is impacting supply chains and the traditional trade flows that have sustained many economies.An interesting side effect and something to watch in 2024 is some of the beneficiaries like Mexico and Vietnam,who are embracing the
8、 opportunities to fill the space left by shifting trade relationships.While were anticipating no significant change to employment figures,2024 could be a year to monitor the impact of tight economic conditions for the corporate world.A wave of debt refinancing in a particularly challenging period co
9、uld put real pressure on business leaders searching for an end to the prolonged pain of recent months.Combined with ongoing geopolitical uncertainty,the coming year could be crippling for many.While the latest KPMG Global Economic Outlook is unquestionably skewed toward a negative forecast,there are
10、 always glimmers of hope and optimism.Since the outbreak of the pandemic,weve had several years of uncertainty and business leaders have demonstrated a real sense of resilience and agility.With the right strategies in place and an ability to flex to an ever-changing world,the most innovative and foc
11、used should eventually start to see some light at the end of the long tunnel.Regina Mayor Global Head of Clients&Markets KPMG InternationalGlobal Economic Outlook December 20232 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to
12、clients.All rights reserved.Global Economic Outlook December 2023ContentsThe global outlook:Limited upside in the short term 4Global trade and value chains:Shaken not stirred 5Countries and regions in focus:United States:The economy endures headwinds 8 Canada:Economy continues to chill 11 Brazil:Mor
13、e rate cuts to come 14 Mexico:Reaping benefits from nearshoring 16 China:Policy stimulus is vital to economic growth 18 Vietnam:A burgeoning manufacturing destination 21 Japan:Yens depreciation complicates outlook 23 India:Increasingly important economically and diplomatically 25 Germany:Europes lar
14、gest economy in a recession 27 Austria:Higher prices and their implications 29 Switzerland:Resilient but not fully immune to shocks 32 Spain:Lower growth for 2024 but gaining traction throughout the year 34 The Netherlands:Technical recession drags on for third consecutive quarter 36 Ireland:Recent
15、strong growth moderating to typical levels 38 UK:Limping with a sprained ankle 40 Czech Republic:Gradual recovery ahead 43 Poland:Growth picking up on a bumpy path 45 Romania:Weakening growth but economic revival in sight 47 South Africa:In search of fiscal consolidation 49 Nigeria:A challenging mac
16、roeconomy amid major market reforms 52 Appendix:KPMG country forecasts 54Global Economic Outlook December 20233 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023T
17、he global outlook:Limited upside in the short termDeceleration in growth in some of the worlds largest economies,coupled with little impetus elsewhere,could see global GDP growth easing slightly in 2024.Weaker momentum should help push down inflation,with average world inflation expected to halve by
18、 2025.Monetary tightening cycle is reaching its end,but there could be an increasing divergence in the timing and the extent of easing by central banks.Weaker economic momentum has helped ease supply chain pressures and reduce broader cost pressures,with energy prices dropping significantly from the
19、ir 2022 peak when Russia invaded Ukraine.Median CPI inflation for the G20 countries fell to 3.9%in October 2023 after peaking at 7.7%in July 2022,and we expect further deceleration in coming months.Our forecasts see world inflation averaging 5.0%in 2024 and 3.9%in 2025,down from an estimated 6.5%in
20、2023 and 8.0%in 2022.Risks are on the upside,however,as any further shocks to energy prices or a more persistent domestic inflation in some countries could derail the relatively smooth return to central banks inflation targets next year.Monetary policy has largely reached the height of the current t
21、ightening cycle.However,many central banks are likely to hold on before starting to ease again.The big question at the moment is when interest rates will start falling and how far down they will go.While central banks such as the National Bank of Poland and Banco Central do Brasil have already begun
22、 to cut rates,our view is that most central banks including the U.S.Fed and the Bank of England would not start acting until well into 2024,with rates settling at a significantly higher level in the medium term than during the decade prior to the Covid pandemic.Higher interest rates are hurting the
23、commercial property market and slowing the pace of housing transactions.A large concern in the U.S.is also the large portion of corporate debt which requires refinancing in 2024 at higher rates.Record-high household debt in Canada also remains a significant risk to the local outlook.Global trade has
24、 plateaued in recent years,partly due to rising protectionist measures and geopolitical tensions.Geoeconomic fragmentation could lead to large output losses over the longer term.So far there is limited evidence of relocation of production on a grand scale,but countries like Mexico are benefiting fro
25、m a boost to economic growth,as foreign direct investment flows are becoming more concentrated among close trading partners.At the same time,supply chains are becoming longer in an effort to avoid trade barriers,with countries like Vietnam acting as one of the destinations for manufacturing diversif
26、ication.Uncertainty triggered by rising geopolitical tensions is exacerbated by policy uncertainty for countries including the U.S.,the UK,India as well as Austria,where 2024 is an important election year.This could see relatively weak business investment in the short term,while there is little room
27、 for governments to pick up the slack as public finances have worsened significantly in recent years.Nevertheless,we expect unemployment to remain relatively low at just below 6%on average globally providing some support for consumer spending despite the various headwinds.This could see global growt
28、h slowing slightly to 2.2%in 2024 before rising to 2.6%in 2025,similar to our estimate of global growth for 2023(see the Appendix on p.54 for our full set of forecasts for the next two years).Yael SelfinVice Chair and Chief Economist,KPMG in the UKGlobal Economic Outlook December 20234 2023 Copyrigh
29、t owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Global trade and value chains:Shaken not stirredChart 1:The exhaustion of global trade tailwinds has led to a slowdownSource:W
30、orld Bank,KPMG analysis.2020Global tariff rate,%Trade,%of GDP9%7%6%8%5%4%3%2%6820042016World trade(RHS)Average tariff rate(LHS)30%35%40%45%50%55%60%65%World trade and production have plateaued in recent years,hinting at a potential shift in the global economic paradigm.The pote
31、ntial for output losses and increased vulnerability to shocks highlight the complex trade-offs in reshaping supplychains.Increased potential for inflationary episodes may exert upward pressure on future interest rates,as central banks recognize the risks associated with fragmentation.Trade openness
32、increased sharply after the Second World War.World trade as a share of GDP increased from 33%in 1975 to a peak of 64%in 2008,where it remains today(see Chart 1).Trade related to global value chains(GVCs),measured as intermediate inputs share in gross production,has risen from 47%in the mid-1990s to
33、a peak of 52%in 2014,before flatlining since.However,flows have stabilized in recent years,leading some to speculate that globalization may be turning.The main concern relates to the idea that structural tailwinds,which supported global integration during the period of trade liberalization,have been
34、 broadly exhausted.The average global tariff rate has fallen from nearly 9%in 1994 to around 3%today.The technological advancements in transportation and communication during the ICT revolution facilitated greater specialization of production and led to offshoring of manufacturing to emerging market
35、s at a low cost.At the same time,operations of multinational corporations have become more service heavy and less dependent on investment in physical assets,which has limited the expansion in goods trade.Global Economic Outlook December 20235 2023 Copyright owned by one or more of the KPMG Internati
36、onal entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023While the low-hanging fruit in trade liberalization has been picked,headwinds have also risen.Rising geopolitical tensions have led to a greater focus on political and na
37、tional security goals in international trade.Trade restrictions including tariff and non-tariff barriers have increased sharply since 2018,with a discernible rise in measures targeting services(see Chart 2).A stark example is the bilateral trade relationship between the U.S.and China.The average U.S
38、.tariff rate vis-a-vis China increased from around 3%to 19%since 2018,with a corresponding rise from 8%to 21%on the part of China.Other recent policies such as the recent EU Carbon Border Adjustment Mechanism seek to reshore production which was previously lost due to manufacturing offshoring to avo
39、id domestic carbon taxes(also known as carbon leakage).There has also been a surge in government subsidies.For example,the U.S.Inflation Reduction Act,worth an estimated USD 369 billion,aims to incentivize firms to manufacture green energy components domestically or in countries which have a free-tr
40、ade agreement with the U.S.The U.S.Creating Helpful Incentives to Produce Semiconductors and Science(CHIPS)Act,worth USD280 billion,aims to boost domestic semiconductor manufacturing capacity through a wide range of subsidies and tax incentives.This sparked a response from the European Union in the
41、form of the European Chips Act(worth USD 47 billion),while similar packages were introduced by China,South Korea,Japan,and Taiwan to support their respective domestic semiconductor industries.Despite a fall in trade policy uncertainty,recent supply chain disruptions have led to an increased interest
42、 in reshoring(bringing production stages back to the home country),nearshoring(moving them geographically closer)and friendshoring(restricting or reorienting production to economic and political allies)(see Chart 3).However,reorganizing supply chains is easier said than done.Given the capital in pla
43、ce,the cost of searching for alternatives,and factors such as wage differentials across countries,this process is likely to be slow.A good example is the largely abandoned effort to switch from just-in-time to just-in-case inventory levels.In many cases,higher interest rates have made the cost of ca
44、rrying excess inventory prohibitive.Recent evidence supports the idea that companies are making an effort to reorganize their production.KPMG has seen an increase in clients who are considering changes to their logistics in order to mitigate risks,but movement has been slow.For example,a large manuf
45、acturer has moved production of some laptops and phones from China to India and Malaysia.While that is an example of diversifying the manufacturing base,it shouldnt be confused with nearshoring:the finished goods are still moving vast distances because theyre high value and relatively cheap to trans
46、port.Creating an entirely new production base is costly both in terms of capacity building and the skills base of the labor force in the new location.Chart 2:Number of new trade barriers by commercial flowSource:Global Trade Alert,KPMG analysis.New interventions per year3,0002,5002,0001,50005001,000
47、GoodsServicesInvestment2016 2017 2018 2019 2020 202222009 200142013Chart 3:Growing interest in making supply chains less vulnerable to uncertaintySource:Caldara et al(2020),Google Trends,KPMG analysis.The dark blue line measures media attention to news related to trade policy u
48、ncertainty.The light blue line shows the number of Google searches for nearshoring,reshoring and friendshoring.2010-15 average=001820242022Trade policy uncertaintyInterest in reshoringGlobal Economic Outlook December 20236 2023 Copyright owned by one or more of the K
49、PMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023The U.S.is ahead of its peers in this regard.There have been at least 32 projects announced in the U.S.of over USD1 billion in investment toward batteries an
50、d electric vehicles since the passing of the Inflation Reduction Act.The value of construction in computer,electronic and electrical manufacturing facilities has shot up by over USD100 billion since 2020.U.S.trade has realigned to key partners such as Mexico and Canada via the USMCA trade agreement
51、one of the strongest examples of friendshoring to date.Evidence for brute force relocations of production is limited.Trade in value added statistics are only available until 2020,but recent forecasts which combine production and trade statistics suggest that GVCs have remained stable since.1 That be
52、ing said,the cracks are starting to show.Foreign direct investment has shown dramatic swings in recent quarters,with investment being concentrated among close trading partners.That could translate to realignments in the longer run.There have also been reconfigurations in trade relations on a balance
53、-of-payments basis.For example,Chinas share of U.S.goods imports fell by nearly 3 percentage points between 2018 and 2020,even as its value-added share of U.S.consumption actually increased over the same period(see Chart 4).These shifts do not necessarily mean that we are seeing less global trade.In
54、 the short run,trade barriers and reorganizing supply chains combined are likely to lead to a lengthening of supply chains and so-called triangular trade,where countries divert their products to avoid trade barriers,potentially leaving the networks more susceptible to supply chain shocks.In the exam
55、ple above,goods could be flowing from China to the U.S.via other countries,leading to the discrepancy between the trade data and the value-added data.Indeed,the share of U.S.goods imports from Vietnam,Chart 4:GVC shares have been steady despite a drop in bilateral tradeSource:Haver,OECD,KPMG analysi
56、s.Change 2018-20(percentage points)0.5-1.50-0.5-1.0-2.0-2.5-3.0Share in goods importsShare in manufacturing GVC-2.70.1-0.7-0.3U.S in ChinaChina in U.S.Chart 5:Estimates of geoeconomic decoupling can be largeSource:Various sources.Long-term impact on world GDP,%0%-4%-1%-2%-3%-5%-6%IMF(2023)for commod
57、ities fragmentationIMF(2023)for FDI fragmentationJavorcik et al(2023)for friend-shoringECB(2023)for friend-shoring(rigid setup)Cerdeiro et al(2021)for technological decouplingIMF(2021)for trade fragmentationBoE(2019)for US-China tariffsMalaysia and Taiwan has risen by 6 percentage points over the pe
58、riod considered,all of which have strong trade ties with China.A similar pattern could be observed over the past year between Russia and its trading partners.Empirical estimates point to potentially large output losses from geoeconomic fragmentation(see Chart 5).They suggest that the global economy
59、could be up to 5%smaller in the long run,depending on the exact nature of the shock.Fragmentation in commodities markets is expected to have a relatively modest effect given the offsetting effects across producing and consuming countries.Set against that,a decoupling of global technology hubs,or res
60、tricting foreign direct investment flows,could result in greater losses,owing to impaired diffusion of knowledge and intellectual capital.A less efficient allocation of resources would also lead to higher prices,especially if it requires labor to be sourced from a more expensive domestic or friendly
61、 pool.Increasing fragmentation in trade,along with geopolitical shifts,could lead to more supply chain disruptions by constraining the availability of possible substitutes in the face of logistical breakdowns.The inherent risk is that those disruptions are inflationary.Recognizing that risk,central
62、banks around the world have begun to focus on supply chains as an area which will increase the likelihood of inflationary episodes.This could put upward pressure on interest rates going forward.Michal StelmachSenior Economist,KPMG in the UKMeagan SchoenbergerSenior Economist,KPMG in the U.S.Moustafa
63、 AliEconomist,KPMG in the UK1 Knutsson et al(2023),Nowcasting trade in value added indicators,VoxEU,September 26.Global Economic Outlook December 20237 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserve
64、d.Global Economic Outlook December 2023United States:The economy endures headwindsChart 6:The U.S.outperforms its peersSource:KPMG Economics,Bbk,ONS,INSEE,CAO,ISTAT,StatCan,BEA.Note:Real denotes inflation-adjusted figures.Real GDP(Index:Q4 2019=100)294Q1Q2Q3Q4Q1Q2Q4Q1Q2Q3Q3Q4Q1
65、Q2Q4Q3202020023GermanyUKFranceJapanItalyCanadaU.S.RecessionThe once beleaguered U.S.consumer emerged as an Atlas,supporting growth at home and abroad.Mortgage applications have plummeted,while housing affordability dropped to its lowest levels since the mid-1980s in the fall of 2023.Uncer
66、tainty around the 2024 election could act as its own tax on the economy as it prompts individuals and firms to hesitate in their decisions about the future.Table 1:KPMG forecasts for the U.S.202320242025GDP2.41.61.6Inflation4.12.72.0Unemployment rate3.64.14.3Source:KPMG Economics,Bureau of Economic
67、Analysis,Bureau of Labor Statistics.Note:Forecasts are dated as of December 12,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.The U.S.economy is poised to stall but not collapse in 2024.The path to a soft landing looks possible and even probable,but the
68、 journey is far from complete.The U.S.economy stood out among its counterparts in much of the developed world,accelerating and exceeding its pre-pandemic trend on growth in 2023.More stunning is that those gains came on the heels of the most aggressive credit tightening cycle by the U.S.Federal Rese
69、rve since the 1980s(see Chart 6).The pandemic,and the stimulus that accompanied it,accelerated balance sheet healing in both the household and corporate sectors.Households paid down their debt,locked into long-term fixed-rate mortgages and banked the savings,which is now earning interest.The once be
70、leaguered U.S.consumer emerged as an Atlas,supporting growth at home and abroad.Atlas is a tale of endurance rather than strength alone.The two are related but not the same.Endurance is more about overcoming the challenges ahead than reflecting on how far we have come.Sectors that once drove employm
71、ent gains started to falter as the Fed raised interest rates.What was a surprise is the extent to which sectors that once lagged were able to pick up the slack.As the economy rounded the curve in 2023,employment gains became more concentrated in three sectors:leisure and hospitality,healthcare and g
72、overnment,largely public education.Those sectors are the least sensitive to interest rate hikes and suffered acute staff shortages in 2023.The concentration of employment gains makes the labor market more vulnerable to external shocks.Global Economic Outlook December 20238 2023 Copyright owned by on
73、e or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023The blow dealt to employment during the height of worker strikes in October 2023 is a case in point.Payroll growth slowed to its lowest lev
74、el since January 2021,before vaccines were widely available and the economy fully reopened,while wages cooled and the ranks of the unemployed moved higher.Those out on strike surged,while the ranks of those displaced by work stoppages hit the highest level since the massive strike in the vehicle sec
75、tor in 1997.The ranks of those forced to take part-time instead of full-time work to make ends meet were evengreater.Much of the drag from monetary tightening is still ahead of us.Credit card and vehicle loan delinquencies rose above their pre-pandemic levels in the second half of 2023 and started t
76、o pass through the economy.Delinquencies in the third quintile of households,which are upper middle-income households,added to the stress already seen among subprime borrowers.Defaults remain low but are expected to move higher with a rise in unemployment.Student loan repayments surged two months ah
77、ead of the end of COVID-era forbearance;those who could,attempted to get ahead of interest accruing on those loans.A shift to income-based repayment schedules and some loan forgiveness will ease the burden of those loans for low-income households.Student borrowers have a year before delinquencies on
78、 their loans show up on their credit reports.This could mean another setback in the access to credit for student loan borrowers in the fourth quarter of 2024.Banks held lending standards in recession territory over the summer.A set of special questions by the Federal Reserve revealed that a fair amo
79、unt of credit tightening is still in the pipeline.Credit for individuals with a credit score of 680 or less will be significantly harder to get;that captures nearly half of all borrowers as we move into 2024.Commercial real estate will suffer another setback,along with commercial and industrial loan
80、s.Both are used to fund large infrastructure projects and cover the cost of inventories.That is before banks deal with the losses in the office leasing market,which will further tighten creditconditions.A larger portion of credit is affected by shifts in the U.S.Treasury bond market.Everything from
81、mortgage rates to corporate and municipal bond yields is linked to Treasury bond yields.We have yet to feel the full effects of the move up in bond yields in the late summer and early fall.Those shifts dumped a bucket of ice on the housing market.Mortgage applications plummeted,while housing afforda
82、bility dropped to its lowest levels since the mid-1980s this fall(see Chart 7).Chart 7:Housing affordability plummetsSource:KPMG Economics,National Association of Realtors.Housing affordability index,fixed-rate mortgages,100+=more affordable22020080120100Recession20987198320031
83、999320152019Lowest affordability since 1985Chart 8:Surge in corporate debt due to reprice Source:KPMG Economics,Federal Reserve Board,Haver Analytics.2022Change in nonfinancial corporate debt,Y/Y,$billions10-Year Treasury Rate,annual average,%8,0006,0004,0002,0000-2,00020012202
84、02018-1%0%1%2%3%4%Change in debt(LHS)10-Year Treasury Rate(RHS)A larger concern is the surge in corporate debt as rates plummeted in 2021 and early 2022.Inflation-adjusted rates dipped into negative territory in 2021 and early 2022,before the Federal Reserve embarked on its rate hiking cycle in Marc
85、h 2022;that was like being paid to borrow.A portion of that debt is scheduled to reset in 2024,which will crimp profit margins along with the leveling up of wages and inability to raise prices.The result is expected to take a toll on employment and push the unemployment rate higher.Interest expense
86、remains low on corporate balance sheets;this is an area that warrants watching as it could be a hurdle to further cooling the broader economy(see Chart 8).Global Economic Outlook December 20239 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide
87、 no services to clients.All rights reserved.Global Economic Outlook December 2023Fed shifts to wait-and-see modeChair Powell has made clear his intent.He believes we need“growth to slow below potential”,which is fed speak for the gradual rise in unemployment.That would qualify as a“soft landing”,as
88、long as the economy avoids the requisite two quarters of contraction needed to declare the economy in a recession.He now sees the risks of overshooting and undershooting on rate hikes as roughly in balance,but the bias is to raise interest rates again.Powell has pushed against the tendency by financ
89、ial markets to front-run the Fed on rate cuts,as that could undo the progress made on inflation and force the Fed to tighten policy further.The Fed will not cut rates until inflation has convincingly dipped below 3%,which is not expected to occur until mid-2024.The 2%target is now more of a floor th
90、an a ceiling for inflation.The descent on interest rates is expected to be much slower than the ascent.The Fed now has much more latitude to cut rates than it did in the past.The era of free money has come to an end,barring another major financialcrisis.Turning to risks to the outlook,everything fro
91、m the political dysfunction in Washington to escalating government debt to geopolitical tensions could shock the economy.A more consequential spike in both Treasury bond yields and oil prices cannot be ruled out.The fact that 2024 is an election year will only add to uncertainty,which acts as its ow
92、n tax on the economy as it prompts individuals and firms to hesitate in their decisions about the future.Diane SwonkChief Economist,KPMG in the U.S.Global Economic Outlook December 202310 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no se
93、rvices to clients.All rights reserved.Global Economic Outlook December 2023Canada:Economy continues to chill20-year-high interest rates will suppress growth in the near term,as consumers cut back on spending and save towards rising mortgage payments.Record-high household debt to remain a top risk to
94、 the outlook.Inflation to cool to the Bank of Canadas target range in 2024,providing ground for the central bank to begin slowly cutting interest rates mid-year.A recession can be averted in the face of slowing global growth due to the soft landing in the U.S.and strong domestic labor force growth i
95、n the near term.Table 2:KPMG forecasts for Canada 202320242025GDP1.00.61.4Inflation3.82.41.9Unemployment rate5.46.26.2Source:KPMG Economics,Statistics Canada.Note:Forecasts are dated as of December 12,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.Canad
96、a is expected to narrowly skirt a recession but our forecasts point to a second consecutive year of sluggish growth in 2024.A soft landing in the U.S.,coupled with expansionary domestic fiscal policy,will help Canada eke out growth of 0.6%next year.Lower interest rates and higher federal government
97、spending will boost growth in 2025.However,growth will be limited due to stagnating productivity and record high household debt levels.The Bank of Canada(BoC)has matched the rapid pace of interest rate increases to the U.S.Federal Reserve bank,with the policy rate hitting a peak of 5%in July 2023,th
98、e highest since 2001.Monetary policy has a faster transmission mechanism to the overall economy than in the U.S.,as mortgage loans renew much earlier.Around a third of all households have a fixed-rate mortgage,most of which expire after five years.Global Economic Outlook December 202311 2023 Copyrig
99、ht owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Households have amassed excess savings estimated to be CAD 464 billion in the second quarter of 2023,according to KPMG estima
100、tes.Canadian households are more likely than their U.S.counterparts to use their savings to blunt the blow of higher mortgage rates.This could lead to sluggish demand for goods and slowing demand for services,as the Canadian consumer accounts for 60%of the overalleconomy.Household debt levels have r
101、isen since the pandemic and remain near 170%of disposable income and 107%of GDP.This makes Canadian households some of the most indebted among the developed economies.Interest payments on both mortgage and non-mortgage debt have soared since 2022(see Chart 9).Delinquencies on auto loans,credit cards
102、 and lines of credit have begun to creep up in response to the burden of that debt.Interest rate shock is one of the largest risks to economic growth in the near term.The Canadian Mortgage and Housing Corporation(CMHC)estimates that 2.2 million mortgages outstanding,or about CAD 675 billion,will res
103、et by 2025.Canada is benefiting from investments in clean energy and the regionalization of manufacturing activity via the U.S.-Mexico-Canada free trade agreement(USMCA),which was ratified in July 2020.Canada has already seen the trade balance in goods jump by 12%compared to a decline in the 2010s(s
104、ee Chart 10).Core annual inflation(excluding food and energy prices)has cooled notably from its 5.5%peak in July 2022 to 3.3%by the fall of 2023.The BoCs target for inflation is a range of 1-3%.A reacceleration in shelter costs over the summer was a reminder that the battle against inflation is not
105、easily won,with rents still rising.Chart 9:Interest payments surge in 2023Source:Statistics Canada,KPMG Economics.Interest paid by households,SAAR,Mil.C$100,00090,00080,00070,00060,00050,00040,00030,00020,000Q1Q2Q3Q4Q1Q2Q4Q1Q2Q3Q3Q4Q4Q1Q2Q3Q1Q2200222023RecessionNon-mortgageMortgageChart 1
106、0:Merchandise trade balance with U.S.Source:Statistics Canada,KPMG Economics.BOP Basis,SA,Mil.C$14,00012,00010,0008,0006,0004,0002,0000Recession20002120192010s trend2020-2023 trendTrade balanceRising costs have eroded households purchasing power over the past few years.Food,ene
107、rgy and shelter costs make up over half of the consumer price index(CPI),which is projected to average 3.8%over 2023.Compared to February 2020,prices will remain 15%higher by year-end,with food 22%higher and shelter 19%higher.All have outpaced wage and salary gains by a significant margin.In respons
108、e,consumer confidence fell to pandemic lows in recent months despite some cooling of inflation.Payrolls surpassed the level hit prior to the pandemic in early 2022 and could end 2023 around 2.5%higher than the year prior.Service-providing industries are expected to continue to lead payroll growth;th
109、ree-quarters of the labor force works in the services sector,compared to just 15%in the goods sector.The unemployment rate is expected to hit a peak of 6.2%in 2024,up from 5.4%in 2023.Recent increases in the unemployment rate have been due to a rise in the ranks of those looking for work,which was b
110、uoyed by the surge in immigration rather than an increase in layoffs.Slower hiring is expected to drive unemployment up in2024.Global Economic Outlook December 202312 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All
111、 rights reserved.Global Economic Outlook December 2023Chart 11:Canadian productivity lags most G7 counterpartsSource:OECD,KPMG Economics.GDP per hour worked,USD,current prices,current PPPs 0209080706020222021JapanCanadaItalyUKU.S.GermanyFranceG7 2022 averageCanada has seen the fastest pop
112、ulation growth in the G7 over the recent years.A surge of newcomers is boosting participation in the prime-age(25-54)labor force.Declining productivity has pushed GDP per capita to decline on a quarterly basis since the second half of 2022.GDP per capita is back to 2017 levels after recovering from
113、the pandemic-era slide.Canada lags most of its G7 counterparts in productivity measures(see Chart 11).We do not expect productivity to be a driver of growth without significant investments.Statistics Canada estimates that population growth could slow dramatically by 2031.Absent a shift in investment
114、,the countrys potential to grow will be diminished.Yelena MaleyevSenior Economist,KPMG in the U.S.Global Economic Outlook December 202313 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Econo
115、mic Outlook December 2023Brazil:More rate cuts to comeThe Banco Central do Brasil has already begun to cut rates as inflation approaches its target.The agricultural sector supported above-expectation growth in 2023,but El Nio in 2024 may hit crop yields.Growth is moderating,but is set to be supporte
116、d by a normalization in monetary policy.Table 3:KPMG forecasts for Brazil 202320242025GDP2.82.02.8Inflation4.53.73.3Unemployment rate8.07.97.7Source:KPMG Economics,Instituto Brasieiro de Geografia e Estatistica.Note:Forecasts are dated as of December 12,2023.GDP,inflation,&the unemployment growth ra
117、tes are annual averages.Numbers are percentages.Growth has moderated following the first half of 2023 which has largely exceeded expectations.Domestic demand has withstood the headwinds of continued tight monetary policy,with advances in both domestic consumption and imports.2024 is likely to see a
118、moderation from the summer of 2023,but still a strongyear.The labor market is still fairly tight,with unemployment standing at the lowest levels since 2015.While the unemployment rate could tick up as the labor market unwinds,an increase in not part of our central forecast.Inflation was on the upswi
119、ng from June to September,but there was a reversal of that trend in October 2023.That put inflation back in the right direction towards the Banco Central do Brasils(BCB)implicit target of 3-4%.Additionally,service sector inflation has remained better anchored than in other regions.Global Economic Ou
120、tlook December 202314 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Chart 12:Brazil interest rates in restrictive territory since spring 2022Source:KPMG Econom
121、ics,Banco Central do Brasil,Instituto Brasileiro de Geografia e Estatistica,Federal Reserve Board,U.S.Bureau of Labor Statistics.BrazilReal monetary policy rates:target rate less annual headline inflation15%10%-10%-5%5%0%20222U.S.Brazil has benefitted from early rate hikes by avoiding the
122、 inflationary effects of currency depreciation.The LA5(Brazil,Chile,Colombia,Mexico and Peru)led the charge to get inflation under control among global central banks.They raised rates aggressively ahead of the U.S.Federal Reserve and other central banks,getting to positive real interest rates more t
123、han a year ahead of Asia,the U.S.and the Eurozone(see Chart 12).That means that the BCB will have more room to cut rates and stimulate the economy in 2024.It cut the key interest rate,the Selic rate,at four consecutive meetings in 2023.We expect cuts to continue,but the BCB will be proceeding with s
124、ome caution so as not to reignite inflation.We expect the interest rate cycle to be much longer on the way down than it was on the way up.Government spending is normalizing,which should support solvency and the cost of debt on the government side.The government debt-to-GDP ratio fell below 2019 leve
125、ls as of 2022;so did the budget deficit.Exports are benefitting from agricultural products and advantageous weather,favorable commodity prices for exports,and very little depreciation in the Brazilian real.Demand for manufacturing exports has also improved.2024 will be an El Nio year.Depending on th
126、e strength of the season,El Nio tends to hit agricultural yields particularly soybeans harder in Brazil.That could suppress agricultural output from the banner 2023 harvest season.The BCB has already begun to cut rates and seen more volatility in prices.The largest risk is in rate cuts that are eith
127、er premature or too rapid,which could reignite inflation in an already slowing economy.That would leave the central bank with the choice of whether to let inflation pick up,or to restrict demand more than it already has.Although that is not the baseline,its probability has risen with the beginning o
128、f a normalization in monetary policy.Meagan SchoenbergerSenior Economist,KPMG in the U.S.Global Economic Outlook December 202315 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlo
129、ok December 2023Mexico:Reaping benefits from nearshoringThe USMCA and supply chain realignments have been a boost to growth.Mexico overtook China as the top exporter to the U.S.in 2023.Manufacturing capacity could limit growth in certain industries.Table 4:KPMG forecasts for Mexico 202320242025GDP3.
130、32.41.8Inflation5.64.13.3Unemployment rate2.82.93.3Source:KPMG Economics,Instituto Nacional de Estadstica Geografa e Informatica.Note:Forecasts are dated as of December 12,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.Mexicos economic growth is expecte
131、d to be flat through 2024,but still better than that of the broader region.The push for nearshoring and/or friend-shoring as a result of geopolitical risk and cost pressures,as well as the U.S.-Mexico-Canada Agreement(USMCA),have provided a boost to manufacturing and spurred employment growth.Mexico
132、 was part of the wave of Latin American central banks that started raising interest rates at the first signs of inflation,and ahead of the U.S.Federal Reserve,the European Central Bank and the Bank of England.The policy rate of the Banco de Mexico(Banxico)is still sitting at its peak of 11.25%.Infla
133、tion has reacted just as the central bank would like and is forecast to continue its downward path through 2024.Banxico is expected to start cutting rates in early 2024 as the inflation rate reaches the banks 3%inflation target.The exchange rate has appreciated roughly 15%against the U.S.dollar sinc
134、e 2022,making the export growth experienced toward the U.S.even more impressive.In mid-2022,Mexico(and Canada)surpassed China in their shares of exports to the U.S.Exports are expected to be the largest contributor to real output growth in early 2024,while investment is dragged down by the high inte
135、rest rate environment.Consumption,which makes up more than 70%of output,is expected to slow as interest rates and still-high inflation continue to affect consumers purchasing power.Geopolitical risks and competitive tariffs are not the only reasons why firms are moving to Mexico.The country boasts t
136、he Organization for Economic Co-operation and Developments lowest cost of labor,further bolstering its place as a premier near/friend-shoring destination.Global Economic Outlook December 202316 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide
137、 no services to clients.All rights reserved.Global Economic Outlook December 2023Chart 13:Companies seeing difficulties hiringSource:KPMG Economics,Banco de Mexico,Haver.Percentage of manufacturers reporting an increase,six-month moving average,%18%16%14%12%10%8%6%4%2%0%RecessionStaff resignationsNu
138、mber of workersDifficulties hiring20220201920232022Chart 14:Manufacturing utilization ticking higherSource:KPMG Economics,INEGI,Haver.Manufacturing capacity,six-month moving average,%95%90%85%80%75%70%65%60%55%RecessionTransportElectricity&electrical appliancesMachinery&equipmentComputing
139、&other equipmentTotal20220201920232022Automobile and auto part production relocated to Mexico from Asia as part of a trend to take advantage of the USMCA agreement.One positive externality to this move is the shortening of supply lines,which not only decreases supply chain risk but also c
140、arbon emissions.On the other side of the“reason for moving”spectrum is industrial and heavy machinery,which has moved to Mexico for geopolitical reasons.However,with an unemployment rate in the 2-3%range,the labor market is tight as real manufacturing earnings per hour have risen by nearly 25%since
141、2018.This can also be seen in the percentage of manufacturing firms having difficulties hiring(see Chart 13).Manufacturing capacity is running short in several key industries that have experienced sizable amounts of supply chain diversification,including electricity and electrical appliances,computi
142、ng and other equipment,machinery and equipment,and transportation(see Chart 14).Normal levels of utilization usually hover around 80%,consistent with the latest reading for the whole economy.However,these select industries which have seen an inflow of attention due to nearshoring have posted utiliza
143、tion rates of between 85%and 95%.Activity in the construction industry is increasing to create new capacity,but that could take years to come online.Set against that,high interest rates are expected to hinder investment to create new capacity.The tight labor market may also start to cause issues if
144、sufficient labor is not available for more complex manufacturing,or the cost of labor continues its rapid rise.Lastly,the president of Mexico is set to leave office in 2024,creating political turnover.Ben ShoesmithSenior Economist,KPMG in the U.S.Global Economic Outlook December 202317 2023 Copyrigh
145、t owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023China:Policy stimulus is vital to economic growth 20%15%10%5%0-5%-10%Real GDP growthFinal consumptionGross capital formationNe
146、t exports20002220232021Annual growth,%Chart 15:Contributions to Chinas real GDP growth by sector,%Source:Chinas National Bureau of Statistics,Wind,KPMG analysis.More policy stimulus to be released to support growth.Consumption should recover to become Chinas key engine,with inc
147、reasing income growth.Technology upgrading and green transformation will support high quality development.Table 5:KPMG forecasts for China 202320242025GDP5.24.54.5Inflation0.41.32.0Unemployment rate5.35.35.2Source:Wind,KPMG forecasts.Average%change on previous calendar year except for the unemployme
148、nt rate,which is the average annual rate.Inflation measure used is the CPI,and the unemployment measure is the surveyed unemployment rate.Chinas GDP grew 5.2%year-over-year by the end of September 2023,above its annual growth target of around 5%set in March.This better-than-expected growth was mainl
149、y driven by the boost from consumption of services following the post-pandemic reopening,improved industrial activities and solid growth in manufacturing and infrastructure investments.As consumer and business activity continues to rebound,supported by government stimulus measures,the drag on the pr
150、operty sector is expected to lessen,and we forecast Chinas GDP to grow at 5.2%in 2023 and 4.5%in 2024.Economic activity underwent a recovery in Q3 as demand and prices continued to improve.Growth in industrial production grew by 4.5%in September and the manufacturing purchasing manager index(PMI)a l
151、eading indicator returned to expansionary territory after five months of contraction.Meanwhile,producer price inflation rebounded to-2.5%in September,up from its eight-year low of-5.4%in June,consistent with improving businesssentiment.Global Economic Outlook December 202318 2023 Copyright owned by
152、one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Thanks to the boost from increased services demand and the release of excess savings,consumption recovery has been stronger than expected
153、.Growth in the retail sector rebounded to 5.5%in September from 3.1%in June,and growth in catering services reached 13.8%(see Chart 16).Tourism revenue from the recent Chinese National Holiday week increased by 129.5%from the same period in 2022,and 1.5%above the pre-pandemic level in 2019,reflectin
154、g the normalization of economic activity.Household expectations for job security and income growth are important drivers in restoring market confidence and consumer spending.The government has taken various measures to keep the job market stable,and the urban surveyed unemployment rate dropped to 5.
155、0%in September,the lowest since 2022.We expect the unemployment rate to average 5.3%in both 2023 and 2024.In addition,income growth reached 5.9%in the first three quarters of 2023,surpassing GDP growth.Income sentiment and consumer confidence have likely improved in Q4,which could support a recovery
156、 in consumption in 2024.Consumer goodsAnnual growth,%100%80%60%40%20%-60%-40%0%-20%202020021Catering servicesChart 16:Growth of consumer goods and catering service,%Source:Chinas National Bureau of Statistics,Wind,KPMG forecast.On the capital side,we expect technology upgrading and green
157、transformation to support manufacturing investment.Infrastructure investment should remain solid in order to facilitate economic growth in 2024.The government has approved RMB 1 trillion additional Central Government bonds in October to fund infrastructure projects.Outlays towards water conservancy,
158、transportation and urban renovation have seen fast growth.Meanwhile,real estate investment is expected to stabilize and become a lesser burden on overall growth in 2024.The government has taken action to stabilize the property market.Although liquidity is still a key challenge for developers,the dec
159、lining rate of funding for real estate developers has narrowed.The latest round of property easing measures on the demand side such as removing mortgage records for first-home buyers,cuts in mortgage down payment ratios and mortgage rates,projects in public housing and urban village renovation may p
160、rovide a boost to new home sales in larger cities.Although the property market is facing considerable headwinds,Chinas increasing urbanization and households growing demand for quality homes should support the market in the long run.While Chinas exports slumped over the past year amid a subdued glob
161、al economy and a higher base effect,it has nonetheless outperformed other major exporters.Chinas share of global exports reached 14.6%in Q2 2023,up from 13.7%in Q1 2023.Despite the slowdown,the product mix of Chinas exports is changing,with increasing high-end manufacturing.Exports of“new three”prod
162、ucts,including solar cells,new energy vehicles and lithium batteries,grew by 41.7%overall by the end of September 2023,becoming the main driver of Chinas exports.Meanwhile,despite slowing exports to advanced economies,Chinas trade with emerging markets continued to rise in 2023.As the growth of expo
163、rts continues to improve,we expect Chinas exports to remain resilient in2024.China is expected to maintain an accommodative policy stance to restore business confidence and boost economic growth.After announcing a set of supportive measures to help private business in mid-July,the government has app
164、roved RMB 1 trillion additional Central Government bonds to support local government spending,and will raise the fiscal deficit ratio from 3.0%to 3.8%in 2023.Fiscal support will be stepped up and be more effective in 2024.Global Economic Outlook December 202319 2023 Copyright owned by one or more of
165、 the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023On the monetary side,the Peoples Bank of China(PBOC)has reduced the reserve requirement ratio(RRR)and policy rate twice this year to date,lowering fund
166、ing costs for businesses and households.We expect China to continue to adopt supportive monetary policy,particularly in targeted areas.For example,the PBOC is expected to cut the RRR to provide liquidity on government bond issuance and cut policy rates.It is also expected to apply special relending
167、facilities to increase financial support to SMEs,green investment,technology,and elderly care.Inflation has remained low in China compared to many parts of the world,but it may see some upward movement in 2024.Food accounts for nearly 30%of Chinas consumer price inflation and the cyclicality of pork
168、 prices is an important factor behind inflation fluctuations.Driven by the recent decrease in pork prices,CPI inflation declined by 0.2%in October.Excluding food and energy,core CPI inflation remains stable at 0.6%,with the support of services consumption.The Hong Kong(SAR)economy is also expected t
169、o recover in 2024.An expected strong rebound of tourism from the Chinese Mainland should support an acceleration of services consumption.The labor market continues to improve,aligned with the revival of domestic activities and inbound tourism.However,weak global demand is expected to weigh on export
170、s.Meanwhile,Hong Kong is accelerating its economic integration with the Mainland,and the development of the Guangdong-Hong Kong-Macao Greater Bay Area(GBA)continues to gain traction.Gary CaiChief Strategy Officer,KPMG ChinaGlobal Economic Outlook December 202320 2023 Copyright owned by one or more o
171、f the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Vietnam:A burgeoning manufacturing destinationChart 17:Vietnam is a low labor cost manufacturing optionSource:KPMG Economics,Wall Street Journal,Gener
172、al Statistics Office of Vietnam,China National Bureau of Statistics,China Ministry of Labor and Social Security,Haver Analytics.Manufacturing wages,2011 USD14,00012,00010,0008,00004,0002,0006,00020202020018VietnamChinaVietnam continues to be a destination for supply
173、chain diversification.Tight labor markets and increasing wage growth could hamper attractiveness.The central bank is cutting policy rates as inflation decelerates.Table 6:KPMG forecasts for Vietnam 202320242025GDP4.65.75.6Inflation3.23.32.6Unemployment rate2.12.02.0Source:KPMG Economics.Note:Forecas
174、ts are dated as of December 12,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.Vietnam is forecast to close 2023 with strong growth that is expected to slow during the latter half of 2024.Even with the weakness,Vietnams real output growth will remain hea
175、lthily above the global average.Geopolitical risk and cost concerns have led firms to relocate manufacturing operations to the country.This makes Vietnam one of the largest beneficiaries of supply chain diversification as companies seek new locations to decrease dependence on concentrated geographic
176、 areas.Consumer electronics,textiles,automobiles and auto parts manufacturers have found the country to be an ideal destination(see Chart 17).In addition,as part of the announcement of the comprehensive strategic partnership(CSP)with the U.S.,several firms in the technology sector including AI and s
177、emiconductor firms have signed agreements to produce or partner with Vietnamese companies.With a relatively young population of around 100 million,Vietnam has a large talent pool and a tight labor market,with the unemployment rate hovering around 2%through 2024.Vietnams long and extensive coastline
178、makes it an ideal place for manufacturing and exporting,as any production facility is never more than 300 miles from the coast or a potential ports.However,while exports are booming,aided by a weakened exchange rate over the last year,imports nearly cancel out any positive contribution to real outpu
179、t.Being a single-party state gives Vietnam relative political stability that can be seen as an attractive attribute to many businesses.The strong growth Vietnam has experienced over the last decade averaging around 6%per year,including during Covid has allowed the Vietnamese government more authorit
180、y over which industries and companies can move their operations to the country.This effectively allows for controlled growth rate that avoids runaway growth that could spur inflation.Global Economic Outlook December 202321 2023 Copyright owned by one or more of the KPMG International entities.KPMG I
181、nternational entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Vietnam has also been focusing on international relations by seeking additional countries to partner with for its highest level of diplomatic relations comprehensive strategic partnerships.T
182、he U.S.has been elevated to this highest rung in Vietnams diplomatic hierarchy,a title held until now by only China,India,Japan,Russia,and South Korea.Other countries currently being considered for CSPs include Australia,Indonesia and Singapore.To combat inflation,the State Bank of Vietnam increased
183、 its monetary policy rate in mid-2022,but has since been cutting rates as inflation has moderated(see Chart 18).Current inflation has been mostly limited to energy,housing,material construction,and food.When stripping out volatile food and energy prices,core inflation has returned to the 3%range,sti
184、ll slightly elevated from the historical norm.Chart 18:The State Bank of Vietnam is coralling inflationSource:KPMG Economics,State Bank of Vietnam,General Statistics Office of Vietnam.Policy rateCPICPI:year/year,%;Policy rate,%7%3%4%5%6%2%1%0%-1%2002020212022Part of the rise in food price
185、s stems from the Indian government passing export controls on non-basmati white rice.Following this decision,countries across the ASEAN region experienced increases in food inflation including Vietnams,which jumped from 8%(quarter-over-quarter annualized rate)in July(when the export controls were an
186、nounced)to 51%in August.The tight labor market and increasingly complex manufacturing that is making its way to Vietnam is expected to increase real wages by around 7%through 2024.However,starting from the low wage base does not mean wages are rising substantially in absolute terms.In order to suppo
187、rt potential growth,additional infrastructure is needed to capitalize on the positive momentum being experienced by the manufacturing sector.Ben ShoesmithSenior Economist,KPMG in the U.S.Global Economic Outlook December 202322 2023 Copyright owned by one or more of the KPMG International entities.KP
188、MG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Japan:Yens depreciation complicates outlookChart 19:Inflation arrives laterSource:KPMG Economics,U.S.Bureau of Economic Analysis,Japan Ministry of Internal Affairs and Communications,Sta
189、tistics BureauJapan:CPI excluding fresh food&energyInflation,year-over-year,%6%5%4%3%2%-2%-1%1%0%202222%inflationU.S.:PCE less food&energyThe Bank of Japan is the only major central bank that has not raised interest rates to curb inflation.The wage negotiations have not been enough to boo
190、st real wages.Inflation is accelerating while the yen is depreciating,raising the probability of central bank intervention.Table 7:KPMG forecasts for Japan 202320242025GDP1.90.11.1Inflation3.22.20.5Unemployment rate2.62.62.5Source:KPMG Economics,Cabinet office of Japan,Ministry of Internal Affairs a
191、nd Communications,Statistics Bureau.Note:Forecasts are dated as of December 12,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.We see Japans economy heading for a“slowcession”in 2024 after a sharp miss on GDP growth in the third quarter of 2023.Consumpti
192、on is sluggish,inflation is climbing and investment and trade are becoming a drag on growth.Exports have been expanding following a weakening yen,but that has not been enough to support the economy.The unemployment rate is rising and will likely settle above its 2019 level as the labor market condit
193、ions unwind.Inflation is stickier than the Bank of Japan(BOJ)had anticipated.The bank has not raised interest rates in part because inflation in Japan has picked up later,and has been concentrated in goods rather than services.Inflation excluding food and energy only rose above the 2%target in Octob
194、er 2022;for context,U.S.core inflation rose above 2%in March 2021.Wages are not necessarily feeding inflation,as real wage growth remains negative;workers will need to wait until Spring wage negotiations to see any gains.Nevertheless,core inflation is elevated above the banks 2%target.Recent yen dep
195、reciation could keep inflation persistent as Japan imports inflation from abroad.That puts more pressure on the BOJ to intervene.The BOJ,while remaining committed to accommodative interest rates,has tweaked its monetary rules in an effort to decelerate core inflation,which should near 2%later into 2
196、024.The policy interest rate has been at-0.1%since 2016.The bank is more worried about overshooting than undershooting;it remains the only central bank among major advanced economies that has not raised interest rates.The changes to the yield curve controls included changing the language around the
197、1%cap on the 10-year yield to be less rigid,which has raised the cost of borrowing without raising rates.Global Economic Outlook December 202323 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Globa
198、l Economic Outlook December 2023The U.S.consumer shift from goods to services will weigh on the external sector for Japan in the near term.However,foreign visitors have been returning and approaching pre-pandemic flows,which has helped services exports.The easing of supply chain bottlenecks has also
199、 improved efficiency for exporters.While we expect fiscal policy to remain supportive,with government debt to GDP ratio hovering around 250%,lower interest rates will keep interest expense low as a percentage of total output.The largest risk to the forecast comes from the challenges posed by persist
200、ent inflation and currency depreciation from the accommodative policy of the BOJ.With the currency close to 150 yen per U.S.dollar(the level that last prompted a foreign exchange intervention in October 2022),the probability of a bank intervention to support the yen has risen.That would restrict mon
201、ey supply and further tighten financial and credit conditions.It is probable that the bank could raise interest rates following the wage negotiation in 2024,further strengthening the yen.That could buy time until other central banks cut rates.Meagan SchoenbergerSenior Economist,KPMG in the U.S.Globa
202、l Economic Outlook December 202324 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023India:Increasingly important economically and diplomaticallyThe G20 Summit was
203、 a testament to Indias diplomatic strength.Supply chain reorganizations are making India a go-to destination for firms.Semiconductor fabrication is heading to the worlds most populous country.Table 8:KPMG forecasts for India 202320242025GDP7.26.05.3Inflation5.55.14.7Unemployment rate6.97.37.3Source:
204、KPMG Economics,General Statistics Office.Note:Forecasts are dated as of December 12,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.Indias economy is expected to slow in 2024 after this years blistering pace,which is forecast to equal pre-pandemic growth
205、 a rarity,as growth has generally slowed globally.The year 2023 proved to be valuable for Indian diplomacy,as the country displayed its ability to work with the worlds largest economies at the G20 Summit.Economic growth is driven by consumption and investment;there are no real drags looking forward.
206、Indias weaker 2024 growth is forecast to be a part of the global slowdown that is affecting all regions,including Asia,which is home to most of Indias key trading partners.Consumers and investors are bullish on the economy,meaning there is room to expand in both the near and medium term.Inflation ha
207、s been a challenge for a couple of years,but it is heading back toward manageable levels.To fight inflation,the Reserve Bank of India raised its policy rate during 2022 and early 2023 from 4%to 6.5%.The rate is expected to stay elevated through 2025 and cause a pullback in investment as financing co
208、sts remain high.India has been one of the largest beneficiaries of supply chain diversification.Being a low-cost manufacturer that dodges the faults of negative geopolitics has made the country very appealing.Automobile and auto part manufacturing as well as consumer electronics have migrated to the
209、 worlds most populous country.Trade with key partners has increased,including a staggering 36%increase in exports to the U.S.between 2019 and 2022,according to the U.S.Census Bureau.Another sector experiencing growth is semiconductors.Chip fabrication chains are on the move,with India attracting a l
210、ot of attention due to its young,vast labor market,and one million engineers graduating from universities annually.India does not produce the most cutting-edge chips,but those that are five to ten years off the frontier.Global Economic Outlook December 202325 2023 Copyright owned by one or more of t
211、he KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Real disposable income is expected to grow around 4%per year,providing additional spending power to Indias increasingly interconnected society.The cell p
212、hone penetration rate is rapidly improving,which is giving access to digital payments and other new services.To handle the pickup in manufacturing,infrastructure is being created.Despite developing road and port access,the country is still underequipped to accommodate the influx of companies seeking
213、 alternative manufacturing destinations.Manufacturing capacity utilization is still at healthy levels and is not at risk of running short.Chart 20:Labor force participation is improvingSource:KPMG Economics,MOSPI.Participation rate,Total,%50%47%48%49%46%45%44%Total(LHS)200232022Participat
214、ion rate,Women,%18%19%20%21%22%24%23%Women(RHS)Chart 21:Tight labor market leads to increasing wagesSource:KPMG Economics,India Labor Bureau.Unemployment rate,%25%15%20%10%5%0%Wage growth,year/year,%0%1%2%3%4%7%5%6%2002120222023Wage growth(RHS)Unemployment rate(LHS)A benefit of the manufa
215、cturing inflow is job creation.While the population is large,women have historically not been major players in the formal workforce.The last couple of years have seen signs of improvement,however,as women have singlehandedly improved the labor force participationrate(see Chart 20).Despite the geopol
216、itical uncertainty,India is proving to be a diplomacy juggernaut.Walking a fine line across relationships with countries in the West and Global South,India has managed to improve its standing among partners.The G20 Summit was the best example of this as Delhi hosted the 2023 edition.While India has
217、portions of its workforce that are well educated,it also has a literacy rate of 78%,per the National Survey of India,which is lower than the UNESCO estimated global literacy rate of 87%.This could prove to be a headwind as the economy continues to develop,new firms enter the market,and skilled labor
218、 becomes more vital.Following a 21%unemployment rate in 2020,the current level is near historical averages during expansionary periods.The tightening market has produced upward pressure on wages since 2022 and that is expected to continue into 2024(see Chart 21).Ben ShoesmithSenior Economist,KPMG in
219、 the U.S.Global Economic Outlook December 202326 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Germany:Europes largest economy in a recessionGerman economy exp
220、ected to slowly recover from 2024 onward.Inflation to continue to ease,with energy prices being a key factor.Labor market proves robust despite weakening economy and persistent shortage of skilled workers.Table 9:KPMG forecasts for Germany 202320242025GDP-0.20.61.6Inflation6.12.92.1Unemployment rate
221、5.65.75.7Source:Destatis,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the CPI.The persistently high inflation level,geopolitical uncertainties,high interest rates and a weak global economy continue to
222、 weigh on the German economy.In particular,the sharp rise in energy costs is impacting Germanys energy-intensive industries,which contribute a large proportion of gross value added.The global tightening of monetary policy and the slow recovery of important foreign markets for German products are als
223、o negatively affecting the export oriented German economy.As a result,output is expected to shrink in 2023.Although sentiment in the German economy remains at a low level,there are positive signals as well.Business sentiment increased slightly in October and in November 2023,with the ifo Business Cl
224、imate Index rising to 87.3 points in November,up from 85.8 points in September.Companies are more satisfied with their current business and less pessimistic about the coming months.In 2024,the German economy is likely to register slight growth and potentially grow faster than some other G7 countries
225、.Rising wages,falling energy prices and the ability of exporters to pass on costs to foreign customers could gradually restore domestic purchasing power in the coming year.The absence of further interest rate increases and possibly even a fall in interest rates over the course of the year could also
226、 help the German economy to continue itsupswing.A particularly long phase of inflationary pressure in Germany is slowly coming to an end.However,even though inflation is easing,it remains well above the ECBs target of 2%.As a result of the sharp rise in the general price level over the past two year
227、s,consumers have become much more reluctant to spend and the savings rate remains high.While rising interest rates are intended to dampen inflation,they are also detrimental to capital spending and thus contributed to a slowing in economic recovery.There is currently great uncertainty among consumer
228、s,companies,and investors,with many refraining from large projects due to high borrowing costs.Global Economic Outlook December 202327 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic
229、 Outlook December 2023Positive signs are coming from the upstream stages of value chains.Significant declines in import,producer and wholesale prices are expected to be gradually passed on to consumers.However,the recent rise in oil and gas prices is again a cause for concern,since it could rekindle
230、 overallinflation.The shortage of skilled workers in many sectors in Germany does not only put pressure on the workforce,but also has a negative impact on general public services,the economy,and overall growth.One of the main causes of this shortage is demographic change.Germany is in a phase in whi
231、ch the population is ageing and the ratio of working to retired people is shifting.Chart 22:Growth in export volumesSource:Statistisches Bundesamt(Destatis)Growth on the corresponding month a year earlier,%60%40%20%-40%0%-20%20202000232021Chart 23:Annual CPI inflationSource:Sta
232、tistisches Bundesamt(Destatis)Annual CPI inflation,%10%6%8%4%-2%2%0%20006200820002002020222012Another factor is the education gap.Although Germany is known for high quality education,there is still a mismatch between the skills learned and the requirements of the labor market.I
233、mmigration of qualified skilled workers,flexible work-life models,and further qualification of the existing and potential workforce could counteract the problem.The use of new technologies,such as artificial intelligence,could also at least partially alleviate the skillsshortages.Despite the challen
234、ges,the German labor market is proving to be resistant to crisis.Although the ongoing economic weakness is gradually making itself felt,the labor market is still holding up well in view of the economic data.Demand for labor remains high,with the number of people in employment at a record level.House
235、holds purchasing power is also picking up,which in turn should support private consumption and thus the economy.Germany has developed a high level of resilience to crises,primarily thanks to its economic strength.For example,the countrys low national debt compared to other countries has facilitated
236、billions in aid packages to be made available to companies to overcome crises.Despite the decline in economic growth this year,we expect the economy to recover and grow slightly across 2024 and 2025.However,external factors such as the evolution of global demand and geopolitical tensions may have an
237、 unpredictable impact on the overall extent ofgrowth.Dr.Ventzislav KartchevHead of Business Intelligence/Markets,KPMG in GermanyGlobal Economic Outlook December 202328 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.Al
238、l rights reserved.Global Economic Outlook December 2023Austria:Higher prices and their implications Stagnation in 2023 due to price pressures and reduced export volumes.Return to positive growth in 2024 on the back of private consumption recovery.Inflation above European peers should moderate in 202
239、4 and 2025.Table 10:KPMG forecasts for Austria 202320242025GDP-0.40.61.5Inflation8.03.22.3Unemployment rate5.15.25.1Source:Bloomberg,Statistik Austria,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the
240、HICP.In 2023 the Austrian economy is in a mild recession due to a variety of exogenous shocks,such as price increases caused by the pandemic,energy price shocks caused by the war in Ukraine,and a series of interest hikes by the ECB.As a consequence,Austria experienced a substantial reduction in inve
241、stment and exports,alongside weak privateconsumption.From mid-2023,real wages started to rise due to softening inflation.Expected wage increases could stabilize real income further and create positive economic impulses.Private consumption is set to remain a vital pillar of the Austrian economy in 20
242、24 and 2025,although growth in spending is expected to be lower than that of real wages.The reason is a higher risk of job losses associated with the economic downturn,which negatively impacts the propensity to consume.Global Economic Outlook December 202329 2023 Copyright owned by one or more of th
243、e KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Chart 24:Wholesale natural gas priceSource:Bloomberg.USD/Million Btu202020232022Chart 25:Annual inflation in Austria and the EurozoneSource:Eur
244、ostat.Annual HICP inflation,%12%6%8%10%4%2%0%-2%20222EurozoneAustriaChart 26:Unemployment rate in AustriaSource:Eurostat.Unemployment rate,%9%8%6%7%4%5%2%1%3%0%20222Nevertheless,activity is expected to pick up in 2024 and stabilize in 2025,mainly driven by a boost from real wag
245、es to private consumption and an expected recovery in exports.However,weak investment,especially in the construction sector due to increased financing cost,is set to weigh on economic growth.Due to the delayed impact of energy price reductions on Austrian retail energy prices,prices remained high at
246、 the beginning of 2023.The gradual pass-through of wholesale price decreases started to lower inflation from Q3 2023,a process which is expected to continue further(see Chart24).In addition,a deceleration of corporate profits due to higher unit labor costs is expected to contribute to a further decr
247、ease in headline inflation.Due to the importance of the services(especially tourism-related)sector in Austria,significant wage growth is set to drive the prices of serviceshigher.Austrian inflation has been a lot higher than its European peers,leading to stronger government response in the form of e
248、nergy price compensations,stimulating inflation further(see Chart 25).Therefore,inflation is going to stay well above the central banks target,although gradually decreasing after 2023,with 2025 expectation still well above 2%.This is mainly due to core inflation(excluding energy and food)projected t
249、o stay high as a result of strong wage growth developments.The labor market is expected to remain resilient despite the economic downturn starting in Q3 2023.We expect employment growth of 0.6%in 2023.Continued employment growth is also expected for 2024 and 2025,if initiatives to increase participa
250、tion of older workers and women pay off as intended.As labor scarcity and demographic issues prevail,the increase in labor participation will not lead to an increase in unemployment,despite stagnation in 2023 and a weak outlook for 2024(see Chart 26).Nominal compensation of employees per head is exp
251、ected to moderate from 8.3%in 2023 to 7.1%in 2024 and 3.9%in 2025,driven by inflation developments and the tight labor market.Global Economic Outlook December 202330 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All
252、rights reserved.Global Economic Outlook December 2023The general government deficit is expected to decrease from 3.5%of GDP in 2022 to 2.6%in 2023.The phasing out of Covid support measures,as well as energy price compensation,are set to contribute to this consolidation.The planned consolidation path
253、 will extend to 2024 and 2025,bringing the deficit further down.Nevertheless,public debt-to-GDP ratio is still at elevated levels,with a projected 76.3%in 2023,and 74.8%in 2025.Due to the strong dependency on Russian gas supply,a further escalation of the war in Ukraine causing gas shortages to indu
254、stry and private households remains a major downside risk to the Austrian economy.Considering firms behavior,there is a significant downside risk for investment activity in 2024,especially in the manufacturing and construction sector.Retail demand has undergone a severe decrease,mainly due to higher
255、 financing cost,lower real income,as well as macroprudential restrictions on loan accessibility.The dynamics will remain limited throughout 2024 and beyond.In addition,the cost of labor hoarding by firms during the downturn could outweigh the cost of recruiting,implying financial pressure for corpor
256、ations.Although there might be additional stimulus by the introduction of new fiscal measures in the light of the 2024 upcoming parliamentary elections,this could also spark further inflation,prolonging the price-related problems in theeconomy.Dr.Stefan FinkChief Economist,KPMG in AustriaGlobal Econ
257、omic Outlook December 202331 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Switzerland:Resilient but not fully immune to shocksChart 27:GDP and exports growth
258、in SwitzerlandSource:Bloomberg.GDP growthAnnual growth,%20%16%12%8%4%-12%-8%-4%0%20220Export volumesReduced investment growth a major factor behind the 2023 weakness.Consumption set to stabilize and bring the Swiss economy back on a growth path.Exports to recover,with risks from global ac
259、tivity and energy prices.Table 11:KPMG forecasts for Switzerland 202320242025GDP0.81.11.6Inflation2.21.71.4Unemployment rate2.22.42.4Source:Eurostat,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the HI
260、CP.The Swiss economy started off well in 2023,but lost momentum from the second quarter on,as foreign demand and domestic final demand did not continue to rise(see Chart 27).The decreasing final demand is mainly attributable to Swiss companies reducing spending on equipment investment.This was only
261、partly compensated by private consumption,with a high willingness to spend in the services sector,and a boost from immigration to the Swiss labor market.Consumption is set to be the main driver of Swiss economic activity in 2024.Although we dont expect positive real wage growth that year,labor deman
262、d should lead to a further increase in employment,with further boost of qualified labor immigration.Global Economic Outlook December 202332 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Eco
263、nomic Outlook December 2023On the corporate side,efficiency-led investment could become worthwhile due to high cost pressures.Therefore,we expect equipment investment to rebound in 2024.Stabilization can also be expected from the construction sector,led by a recovery from the recent downturn.Further
264、more,a rebound in western Europe should support exports growth,which is backed by a solid foundation of non-cyclical products,such as pharmaceuticals.Additional stabilizers include tourism,transport and consulting sectors.Given the strength of the Swiss franc versus the main currencies(euro and the
265、U.S.dollar),the Swiss economy still manages to be rather resilient,with the expectation of only limited reduction in export activity in 2023 and 2024(see Chart 28).According to our forecast,a decline in goods exports is set to end in 2024 and to pick up again in 2025.Chart 28:Swiss franc exchange ra
266、tesSource:Bloomberg.CHF EURForeign exchange rate1.201.151.100.900.951.001.0520220CHF USDThe Swiss labor market is expected to cool slightly,with only a marginal rise in employment over 2024 and 2025,of around 1%.The unemployment rate is also expected to increase,albeit remain low by histo
267、rical standards.This is mainly due to the dampening in cyclical areas of manufacturing and wholesale industry,with the possibility to spill over to other industries in the private sector.There are substantial risks to the outlook.Inflation could prove more persistent globally and necessitate more re
268、strictive monetary policies.This would further slow down global demand,limiting export dynamics in Switzerland.Moreover,there could be an increase in existing risks associated with global debt,the risk of property and financial market corrections,as well as risks in the banking sector.In addition,th
269、e transmission of monetary tightening to the real economy could turn out to be stronger than currently assumed.In the near term,an energy shortage in the winter of 2023-24 still poses the risk of an economic downturn,both in Europe and in Switzerland.While this would likely result in a recession com
270、bined with high price pressure,we see this as a low probability scenario.Dr.Stefan FinkChief Economist,KPMG in AustriaGlobal Economic Outlook December 202333 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights r
271、eserved.Global Economic Outlook December 2023Spain:Lower growth for 2024 but gaining traction throughout the yearPost-pandemic rebound,Next Generation EU funds,and moderation in salaries behind strong growth in 2023.Salaries expected to grow faster than inflation in 2024,slowing down job creation bu
272、t strengthening internal demand.Impact of monetary policy set to ease inthe second half of 2024.Table 12:KPMG forecasts for Spain 202320242025GDP2.51.51.8Inflation3.63.42.3Unemployment rate12.211.611.3Source:Instituto Nacional de Estadstica,KPMG forecasts.Note:Average%change on previous calendar yea
273、r except for unemployment rate,which is average annual rate.Inflation measure used is the CPI.The Spanish economy showed a better-than-expected performance in 2023.Growth is projected to be around 2.5%,well above the Eurozone and Spains main trade partners.This strong performance can be explained by
274、 three different factors.First,in 2023,the Spanish economy still had a GDP gap to fill from the pandemic:the contraction in 2020(-11.2%)was larger than in other advanced economies,and,although the recovery was strong in 2021 and 2022(with growth of 6.4%and 5.8%,respectively),it still lagged other Eu
275、ropean economies.GDP did not reach 2019 level until end-2022.The second reason behind the resilience was a marked acceleration in the level of investment and of the Next Generation EU funds committed,compared to the slow start in 2021 and 2022.The final,and probably most important,factor behind stro
276、ng growth is that,throughout the recovery,nominal unit labor costs have grown slower than the prices set by Spanish companies.In other words,internal prices have grown faster than salaries.Although this reduction in real wages has somewhat eroded the real disposable income of certain households,it h
277、as also helped to support job creation and maintain or even improve external competitiveness.At the same time,the impact of monetary tightening by the ECB has potentially had a more limited effect than initially thought on consumers disposable income,real estate prices,and gross capital formation.Bu
278、t this does not mean that the interest hike has not taken its toll.Growth has been progressively decelerating in 2023.Global Economic Outlook December 202334 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights r
279、eserved.Global Economic Outlook December 2023With annual CPI inflation of 3.2%in November 2023,and an expected average inflation of 3.6%for the whole year,Spain is placed towards the lower end for OECD countries.Spanish inflation is very sensitive to oil prices;this explains both the sharp rise in 2
280、022 and the abrupt decline in 2023.Core inflation is also falling,but at a much slower pace.A warning signal to pay attention to,however,is that for the first time since 2022,Spanish inflation was higher than in the Eurozone in October and November(see Chart 29).Employment growth is strong,at around
281、 3%,and the unemployment rate is expected to decrease to 12%in 2023.Contained salary growth explains this performance of the labor market,as well as the resilience of private consumption,as the limited erosion of the real wages was more than compensated by job creation.Correlated with slower GDP gro
282、wth as the year progressed,there are also signals of some weakening in the Spanish labor market in the second half of 2023.A much weaker growth can be expected for 2024.Our forecast is for growth of 1.5%.But if growth in 2023 was losing steam throughout the year,we expect activity to gain traction t
283、hroughout 2024.The impact of monetary tightening could reach its maximum towards the end of 2023 and the beginning of 2024.But the constant decrease in headline and core inflation in the Eurozone points at stable or even more relaxed monetary conditions as we advance into next year.Next year we also
284、 expect salaries to grow faster than inflation,slowing down job creation but also strengthening internal demand through private consumption.Although Spain is set to maintain a healthy surplus in its external accounts,external demand is not expected to contribute to growth in 2024(see Chart 30).Conse
285、quently,the unemployment rate is forecast to continue decreasing,but at a much slower pace than in 2022 and 2023.Chart 29:Annual inflation in Spain and the EurozoneSource:Eurostat.12%6%8%10%4%2%0-2%EurozoneSpainAnnual HICP inflation,%20002020223Chart 30:Contributions
286、 to GDP growth from internal and external demandSource:Instituto Nacional de Estadstica.20510150-5-15-10-20Internal demandExternal demandContribution to annual GDP growth(percentage points)20002020223Regarding prices,we expect a further reduction in average headline
287、inflation to 3.4%.One of the key issues to impact inflation in 2024 is the extent to which the expected phasing out of government measures implemented to mitigate the impact of high energy and food prices will be.If this is not complete,the final inflation figure could be a little lower,but the trad
288、e-off will be in a small increase in the public deficit.Turning to the fiscal position,we expect the deficit of around 4%of GDP in 2023,with the public debt-to-GDP ratio falling to 108%from 120%in 2020.However,most of the expected reduction in public deficit and debt is explained by the economic cyc
289、le and by the increase in nominal GDP.To continue this trend and to achieve the objective of a deficit of 3%of GDP in 2024,the Government would have to phase out most of the fiscal measures implemented to counteract the impact of high inflation.This is probably the most important challenge that the
290、recently elected Spanish government will face on the economic front in the short term.Pablo BernadHead of Markets and Consulting Corporates,KPMG in SpainGlobal Economic Outlook December 202335 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide
291、no services to clients.All rights reserved.Global Economic Outlook December 2023The Netherlands:Technical recession drags on for third consecutive quarterChart 31:Economic growth by demand componentsSource:Statistics Netherlands,KPMG analysis.15%10%5%0-5%-10%GDP growthConsumptionInvestmentGovernment
292、Net tradeChanges in inventories200232021Contributions to annual GDP growth,%Economy set to gradually recover following a shallow recession.Energy prices weigh on inflation;core inflation set to decrease more gradually.Talks to form a coalition are set to soon begin following the general e
293、lection.Table 13:KPMG forecasts for the Netherlands 202320242025GDP0.50.81.6Inflation4.62.92.4Unemployment rate3.63.83.8Source:Eurostat,KPMG forecasts.Note:Average%change on previous calendar year expect for unemployment rate,which is average annual rate.Inflation rate measure is CPI.The technical r
294、ecession in the Dutch economy has not ended yet,after registering a quarter-on-quarter contraction of 0.2%in Q3 2023,marking the third consecutive decline(-0.5%in Q1 and-0.4%in Q2).Growth was also negative on an annual basis(see Chart 31).The contraction in Q3 was primarily driven by inventory deple
295、tion and reduced investment,notably in the energy supply and recreation&culture sectors.While public spending showed positive growth,private consumption remained weak due to the ongoing impact of higher inflation on households.However,the drop in activity has not amounted to be a full-blown recessio
296、n(or less so a crisis)as the job market remains tight,vacancy rates remain high,and the number of corporate bankruptcies remain low by historical standards.The fast rebound following the pandemic came to an end early this year,and the economy is now undergoing aslowdown.We forecast Dutch GDP to grow
297、 at 0.5%in 2023 and average 1.2%during 2024-25,remaining below its average historical growth.The recovery from this shallow recession is anticipated to be gradual,compounded by a persistently tight labor market.In 2024 and 2025,growth is set to be supported by lower inflation and improvement in hous
298、eholds real purchasing power.We expect export volumes to pick up as demand from significant trading partners stabilizes.Additionally,growth could be bolstered by increased public expenditure and a gradual rebound in private investment.The balance of risks is currently neutral,with potential downside
299、 risks linked to the impact of tighter financial conditions and persistent structural laborshortages.Global Economic Outlook December 202336 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Ec
300、onomic Outlook December 2023On the prices front,annual headline inflation has moderated below 2%since September on the back of lower energy prices and base effects.We anticipate inflation to remain below 3%throughout 2024-25.Meanwhile,inflation excluding energy and fuels is predicted to decrease mor
301、e gradually,mainly due to higher persistence of food and services prices.Nominal wages are expected to grow above 4%over the forecast horizon,driven by labor shortages;however there are early signs suggesting a softening in labor demand.House prices fell during the first part of 2023,but the correct
302、ion appears to be over as housing transactions continue to gradually increase and overbiddingreturns.Chart 32:Dutch government debt and fiscal deficitSource:Statistics Netherlands,DNB,KPMG analysis.Note:2023 values are forecasts.Debt ratio,%GDP80%30%40%50%60%70%20%10%0%Fiscal deficit,%GDP-6%-5%-4%-3
303、%-2%3%-1%0%1%2%2003200520072009200023Debt ratio(LHS)Fiscal deficit(RHS)-0.3%48.3%The Freedom party(PVV)won the Dutch parliamentary elections on November 22,and a coalition is yet to be formed.The future policy direction is contingent upon the coalitions decisions.However,the pr
304、oposed economic measures appear to carry significant costs,suggesting a potential widening of the fiscal deficit.While the PVV is likely to cut spending on climate and energy transition initiatives,they have also pledged substantial additional expenditures on healthcare and free public transportatio
305、n for senior citizens.Few measures aimed at bolstering household purchasing power are expected to persist into 2024,owing to diminishing inflationary pressures.There is ambiguity surrounding the costs linked to the approved pension fund reform initiated in June 2023(transitioning from a defined bene
306、fit to a defined contribution scheme),particularly with the PVVs declared intent to overturn the legislation.The projected deficit outlined in the Dutch spring budget for 2024 is expected to exceed 3%,surpassing the threshold permitted by Brussels.This deviation is attributed to multiple amendments
307、in bills.The budget anticipates a deficit below 3%in 2025,followed by an escalation to 3.6%in the subsequent year.The debt to GDP ratio is expected to remain below 50%in 2024-2025 as a consequence of higher nominal GDP,mainly driven by the price component(see Chart 32).Diego Vilchez NeiraSenior Mana
308、ger,KPMG in the NetherlandsGlobal Economic Outlook December 202337 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Ireland:Recent strong growth moderating to typ
309、ical levelsStrong multi-year economic growth arrested in the latter half of 2023.Exchequer revenue boom slowing as corporation tax take moderates.Demand-led economy generating opportunities and challenges.Table 14:KPMG forecasts for Ireland 202320242025GDP-0.53.03.5Inflation5.53.02.0Unemployment rat
310、e4.24.34.4Source:CBI,CSO,DOF,EC,ESRI,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the HICP.Following on from a strong bounce-back after the Covid pandemic,Irelands economic growth evolved in 2023,with
311、 the domestic economy becoming the predominant driver of growth.GDP performance slowed in 2023,ending with a fall of-0.5-1.0%,while the domestic economy was relatively flat over the year(0.0-0.5%).A key issue for Ireland remains that dual economy challenge.In 2023,the slowdown in global demand trigg
312、ered marked reductions in export volumes,adding to the post-pandemic contraction in exports of pharmaceutical and medical products.Other factors,such as a renewed surge in commodity prices,an intensification of conflicts,and tighter-than-expected global financial conditions,all weigh heavily on the
313、domestic economy.As the Multinational Enterprise(MNE)sector has accounted for more than 50%of Irish GDP since 2020,global shifts can have large local impacts.In 2023,Modified Domestic Demand(MDD,a measure of the domestic economy)continued to grow,albeit at a more moderate pace in the context of high
314、 inflation that is curbing spending by households and businesses.Over the coming years,Ireland is expected to see more nominalized and moderate growth rates,as consumption recovers with rising real wages,subsiding price pressures,and a strengthening in investment and exports as external demand picks
315、 up.Most forecasters are anticipating GDP growth in 2024 and 2025 in the range of 3%-3.5%,and slightly lower growth in MDD,at 2%-2.5%over the sameperiod.Against this backdrop,unemployment is expected to remain at low levels over the forecast horizon(4%-4.5%),with net migration and employment growth
316、driving higher job numbers overall.These tight labor market conditions could see an intensification of the upward pressure on wages,potentially leading to nominal wage growth of 5%-5.5%in 2023 and 2024,reflecting a catch-up following the hits to real incomes in 2022 and 2023.Global Economic Outlook
317、December 202338 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023Inflation remained elevated throughout 2023,but gradually fell over the course of the year.Althou
318、gh energy prices fell earlier in 2023,these were not passed on to consumers until several quarters later.While the central outlook is for a gradual easing in energy prices and a restoration of real incomes to pre-2022 levels,retail energy prices are likely to stay elevated and will remain vulnerable
319、 to further volatility in the energy market.Despite ongoing government support,arrears in retail energy markets indicate that a cohort of consumers are facing difficulties with meeting higher costs.In addition,inflation is now being driven by higher housing costs and food costs,which are in turn dra
320、gging on domestic consumption.Overall,it appears that the ECBs tighter monetary policy since 2022 will bear fruit,but slowly.Other factors at play in Irelands economic outlook are its property market and the Governments finances.Irelands residential property market grew strongly over the past severa
321、l years,buoyed by strong economic growth,low unemployment,and high levels of foreign direct investment.Although households showed resilience in 2022-2023 and benefited from robust income growth,some are facing repayment challenges,with the full extent of higher interest rates and monetary policy pas
322、s-through still to come.The market remains broadly balanced,with competing forces of a continued lack of supply and increasingly stretched affordability leading to the leveling off in growth.Higher ECB interest rates are expected to weaken mortgage demand,with negative implications for house prices.
323、However,a major threat to the housing market is the lack of housing supply,which could drive more aggressive price gains over the next one to two years.After a marked increase in housing completions in 2022,and weathering of supply pressures in 2023,there is an indication of further growth in 2024.A
324、 key indicator for the medium-term outlook is the strength of the public finances.Most forecasters were anticipating that the long period of high levels of corporation tax receipts would end in 2023,but receipts summing to a peak of 27%of total income were collected nonetheless.2024 will provide cla
325、rity around the overall trend and potential risks to central government spending plans.Taken together,there are reasons to be pragmatic about Irelands economic outlook in 2024 and beyond.While positive growth is expected,this would be more modest than in the past.The period of high corporation tax r
326、eceipts is passing,meaning more cautious budgetary policy,while significant levels of investment are needed to meet demand and investment in infrastructure,housing,healthcare,and renewables.While open economies typically face greater challenges during global downturns,they are also best placed to ta
327、ke advantage of underlying global growth potential during recoveries.Dr.Daragh Mc GrealDirector,Strategic Economics,KPMG in IrelandGlobal Economic Outlook December 202339 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients
328、.All rights reserved.Global Economic Outlook December 2023UK:Limping with a sprained ankleChart 33:Successive market forecasts for UK GDP growth in 2023Source:Consensus Economics,KPMG analysis.Expected GDP growth in 2023,%4%2%3%1%0%-1%-2%Jan2022MaySepMaySepJan2023ConsensusRange of forecastsActivity
329、has outperformed expectations,but the outlook remains weak and vulnerable to shocks.Although the peak in inflation is behind us,a large part of the impact from monetary policy is still to come,continuing to depress growth.Risks to the outlook are skewed to the downside,and stem from a more persisten
330、t inflation,delayed impact of monetary policy,and structural weakness of labor supply.Table 15:KPMG forecasts for the UK 202320242025GDP0.50.51.0Inflation7.52.82.1Unemployment rate4.14.74.9Source:ONS,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is a
331、verage annual rate.Inflation measure used is the CPI and the unemployment measure is LFS.The UK economy has performed better than expected this year.At the start of 2023,market consensus for GDP growth for that year was consistent with a 1%fall(see Chart 33).The latest expectation matching our own f
332、orecast is for growth of 0.5%in 2023.On a year-to-date basis,business investment grew by 6.3%in Q3 2023,while household consumption the main engine of growth in normal times was up by 0.3%,although the latter is still some way below its pre-pandemic level,largely as a result of successive negative s
333、hocks to real incomes.Global Economic Outlook December 202340 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Global Economic Outlook December 2023There are a number of reasons why growth has been relatively resilient.Energy prices have fallen,driving down headline inflation.Set against that,a tig