1、Global Economic OutlookMarch 2023home.kpmg/globaleconomicoutlookIntroductionWe may only be part-way through 2023,but the phrase that has overwhelmingly dominated conversations from boardrooms to political chambers and Main Streets has been the cost-of-living crisis.In recent years,the world has face

2、d waves of challenges,from the pandemic to the invasion of Ukraine,to the unfolding bank liquidity challenges amidst skittish depositors.The impact of such a lengthy period of uncertainty is being felt by everyone and thats reflected in KPMGs latest Global Economic Outlook.How we get back to sustain

3、able,longterm growth is the big question facing boardrooms and political chambers around the world right now.Some of the biggest inflationary fears widely predicted late last year have been mitigated by more direct,proactive political action geared especially towards getting rising energy prices dow

4、n.There are also signs that other commodities and food prices are finally starting to ease helping consumers and business owners whove been facing a significant financialsqueeze.The actions taken over the coming months are likely to play a significant role in the pace and nature of the worlds econom

5、ic recovery.KPMGs analysis forecasts that employment levels should remain robust,even given recent tech layoff announcements a sign that the tightness of the labor market faced postpandemic shows no sign of easing.Its an indication of the complexities the world faces today.Strong employment figures

6、are often held up as an example of buoyant market conditions,but they can also reflect the challenges central banks are facing as they attempt to juggle wage expectations,tightened credit conditions and the everpresent danger that any shift in the conflict in Ukraine could bring inflation back into

7、the mix.The upside of a strong labor market,combined with relatively strong personal savings among consumers especially in Europe and the Americas means we could start to see a return to robust consumer spending,driving a return to slowbutsteady domestic growth in key markets.KPMGs Global Economic O

8、utlook is a forecast.Its based on detailed analysis of trends and models from KPMG firms economic specialists across the world.Digging deeper into the numbers isnt an exact science,but it can offer a good indication of what may lie ahead and should help to equip business leaders with a greater under

9、standing of what lies behind todays complex marketplaces,enabling them to develop more robust strategies focused on the ultimate goal of a return to sustainable,global growth.Regina Mayor Global Head of Clients&Markets KPMG InternationalGlobal Economic Outlook March 20232 2023 Copyright owned by one

10、 or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.ContentsThe global outlook:Treading cautiously amid risks 04Countries and regions in focus:United States:A tale of two economies 07 Canada:Winding down to hit inflation target 1

11、0 Brazil:New policies could stoke inflation 13 Mexico:Policy headwinds make for muted growth 15 China:Domestic demand as the key for recovery 17 Japan:Recovery stifled by rising prices and global headwinds 20 India:Cautiously shining amid global uncertainty 23 Germany:Europes largest economy to esca

12、pe recession 25 Austria:Mild recession,slow recovery 27 Switzerland:Testing the frontiers of resilience 29 France:Economic outlook clouded by inflationary pressures 31 Italy:Cautious optimism as outlook brightens 33 The Netherlands:Economy to remain resilient as fiscal deficit widens 35 Ireland:Cont

13、inued growth,comes with caveats 37 UK:Shortterm momentum masks underlying headwinds 39 Central and Eastern Europe:Not a uniform story 42 South Africa:Lacking the power to grow 45 Nigeria:Challenging macroeconomic fundamentals in a transition period 47 Appendix:KPMG country forecasts 49Global Economi

14、c Outlook March 20233 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The global outlook:Treading cautiously amid risksSharp falls in inflation will likely leave behind some of the recent challenges

15、 for the global economy.Central banks approaching the end of the tightening cycle partly as a response to rising tensions in financial markets.Easing supply chain pressures and resilient labor markets to support recovery but uncertainty about the outlook is on the rise.Inflation no longer central st

16、ageThe outlook for the global economy took a positive turn early in the year.Inflationary pressures began to ease,with global energy prices back at levels last seen prior to the invasion of Ukraine.In addition,base effects from the rise in energy prices following the invasion are now coming off,putt

17、ing further downward pressure on inflation for the rest of this year.Prices of other commodities as well as global food prices have also eased.However,domestic inflationary pressures remain relatively elevated in a number of economies,in particular those with tighter labor markets,although even ther

18、e inflation probably already passed its peak around the second half of last year(see Chart 1),with headline inflation expected to continue falling this year,and potentially reaching central banks targets by 2024 1.Chart 1:CPI inflation among G20 economiesSource:Refinitiv Datastream,KPMG analysis.Not

19、e:The chart excludes Australia and the EU,as EU countries are covered individually.Annual inflation,%9%8%7%4%6%5%3%2%1%0%-1%20002008200042002200202022Median35-65 percentile1 See the Appendix for individual country forecasts.Global Economic Outlook March 20234 2023 Copyright own

20、ed by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Central banks face a trickier outlookWhile the outlook for inflation has improved significantly,many central banks remained cautious at the start of the year.The concer

21、n was that the bout in inflation,as a result of the reopening of economies after Covid19 restrictions followed by a commodity shock due to the invasion of Ukraine,has been embedded in inflation expectations and therefore pricing behaviors of firms and wage expectations of employees.The worry is that

22、 inflation could remain sticky,with core inflation(which excludes items such as food and energy)stubbornly high and price rises widespread across the economy due to a relatively tight economic environment in some countries.Recent tensions in the banking system,which were triggered by the collapse of

23、 Silicon Valley Bank and Signature Bank in the U.S.may complicate matters for central banks.The uncertainty it unleashed will inevitably tighten credit conditions while exposing markets fragility following an unprecedented period of monetary tightening.Last year saw a sharp rise in policy interest r

24、ates,with most central banks raising them significantly during the year(see Chart2).While the tightening cycle almost reached its course in some economies,other central banks notably the Fed and ECB were expected to tighten further.However,latest developments in the banking sector and bond markets c

25、ould see rates peak sooner and at lowerlevels.Chart 2:Central banks have been tightening monetary policySource:Bank for International Settlements,KPMG analysis.Number of central banks changing policy rates on the previous month3020100-10-20-302020202182017Cutting ratesRaising ratesRoom fo

26、r growthWith monetary policy focused on moderating inflation while stabilizing financial markets,fiscal policy is left as the potential tool to boost economic growth.Unfortunately,the public finances have deteriorated significantly over the past three years.Governments have spent significant amounts

27、 on first shielding their economies from Covid19 and subsequently on protecting households and businesses from higher energy prices.That left public debt at historically elevated levels,with less room for expansionary fiscal policy.Even in the U.S.,federal spending is expected to slow despite the ra

28、mp up in infrastructure spending,although in China fiscal support is to be stepped up following the reopening of the economy.The rise in interest rates has made these larger debt levels more costly to service,putting further pressure on government finances.Nevertheless,some positive growth momentum

29、is expected this year from the relatively smooth reopening of the Chinese economy following the lifting of Covidrelated restrictions in December last year.The pressure on global supply chains has eased significantly in recent months,while shipping costs have dropped too.This should help alleviate so

30、me inflationary pressures and improve supply capacity.Global trade remains relatively weak,although we would expect it to recover this year as trade flows normalize with the reopening of the Chinese economy and a recovery in global growth,while we expect geopolitical tensions to continue to exert so

31、me pressure on trade flows over the medium term.Consumer demand is also expected to pick up this year,with excess savings money saved during the pandemic when spending on certain services was not possible still relatively high in China and Europe which could potentially be deployed once confidence r

32、eturns.Indeed,consumer confidence has started to improve in Europe,although it remains at relatively low levels(see Chart 3).Chart 3:Consumer confidenceSource:GfK,University of Michigan,European Commission,Refinitiv Datastream,KPMG analysis.Deviations from the 2018-19 average50-5-10-15-2020182022202

33、23UKUSEurozoneChinaGlobal Economic Outlook March 20235 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.One lingering risk is that rising interest rates and tighter credit conditions would

34、 see further falls in house prices,particularly in the U.S.and some European economies where valuations are relatively high.That in turn could depress consumer confidence and spending again.However,the labor market remains relatively tight across most countries,and we are not expecting any major ris

35、e in unemployment this year,as outlined in our forecasts for individual countries in the Appendix.This should provide an important support for households incomes and consumer spending,even though real incomes are squeezed as a result of the high levels of inflation.Households purchasing power is exp

36、ected to recover gradually over the medium term as wage increases overtake inflation once more from next year.Despite the resilience of the labor market and the improving inflation conditions,we expect global economic growth to be relatively modest over the next two years,and to stay below its longt

37、erm average(see Chart 4).Global growth is expected to be driven by the recovery of the Chinese economy and a relatively strong growth in some of the emerging markets,while the Eurozone and U.S.economies are expected to contribute less to global growth over the next two years.Risks to our forecasts a

38、re broadly skewed to the downside given the volatility in financial markets.The global economy has been through a series of significant shocks over the past three years the Covid19 pandemic and the RussiaUkraine conflict and saw a major expansion to government debt and a significant hike in policy i

39、nterest rates by central banks.The ramifications of some of that may not have surfaced yet and we are still to see their full impact and how they interact.Yael SelfinChief Economist,KPMG in the UKChart 4:KPMG global growth projectionsSource:IMF,KPMG projections.ForecastContributions to annual world

40、GDP growth,%6%4%2%0%-2%-4%WorldUSEurozoneChinaOther emerging economiesOther advanced economies200520062007200820092000022420152016Global Economic Outlook March 20236 2023 Copyright owned by one or more of the KPMG International entities.KPMG International

41、entities provide no services to clients.All rights reserved.United States:A tale of two economiesA tale of two economies is emerging:firms that benefitted most from the pandemicinduced boom are pulling back,while startups and firms that were late to the recovery are still ramping up.Labor shortages

42、are more structural than cyclical.A strong labor market,which feeds more directly into service sector prices,is upping the risk of a more prolonged and corrosive bout of inflation.Service sector inflation is getting sticky.Recent efforts by regulators are hoped to eventually calm financial markets;t

43、hat will not prevent a more systemic tightening of credit conditions.The Federal Reserve will weigh those shifts as they determine how far to go on rate hikes.Growth in the U.S.is forecast to slow to a 0.9%pace in 2023,less than half that of 2022.After a solid start,the economy is expected to suffer

44、 a mild contraction midyear.The unemployment rate is expected to rise,but only modestly.Prices in the service sector,where labor costs play a larger role in setting prices,are starting to look sticky.The Federal Reserve will continue to raise rates and keep monetary policy restrictive well into 2024

45、.A tale of two economies is emerging.Firms that benefitted most from the pandemicinduced boom are pulling back;tech,finance and manufacturing activity are hardest hit.Startups and firms that were late to the recovery are still ramping up.The pace of highquality business formation firms that intend t

46、o hire,not the selfemployed were still nearly 40%above the pace of the 2010s in January.Our own analysis suggests that those firms accounted for more than half of the excess demand for workers since February 2020(seeChart 5).The most recent Job Opening and Labor Turnover Survey revealed that firms w

47、ith less than 250 employees dominated net hiring and job postings since the economy reopened.That continued except for job openings for construction in late January,which plummeted.Employment gains actually accelerated at the start of the year as firms with less than 250 employees absorbed what is b

48、eing shed at some larger firms.Table 1:KPMG forecasts for the U.S.202220232024GDP2.10.91.3Inflation8.04.32.4Unemployment rate3.63.64.3Source:KPMG Economics,Bureau of Economic Analysis,Bureau of Labor Statistics.Note:Forecasts are dated as of March 2,2023.GDP and inflation are yearoveryear%change.The

49、 unemployment rate is an annual average.Numbers are percentages.Chart 5:High propensity business formationSource:KPMG Economics,Census Bureau.RecessionAverage in 2010s=100,000High-propensity business applications(SA,number)200,000180,000160,000140,000120,000100,00080,00060,000Jan2019Jan2023Jan2020Ju

50、l2019Jul2020Jan2021Jul2021Jan2022Jul2022July 2020Jan-Jun2021Global Economic Outlook March 20237 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Anatomy of a slowdown Consumer spending is expected to

51、 stall but not collapse.A healing of household balance sheets and a ramp up in saving is buoying demand.Tighter credit market conditions are eroding affordability and will take a toll on employment,especially among younger,smaller businesses that are more susceptible to the current tightening of cre

52、dit marketconditions.Bigticket items such as appliances and home furnishings are expected to be hit harder than services;goods purchases tend to get financed,while pent up demand for travel remains strong.Those out of work and unable to work due to vacations are hitting monthly records.The recession

53、 in housing is expected to deepen,with higher interest rates dealing a larger blow to sales and construction than prices.An unusually high percentage of homeowners have either locked into an ultralow 30year fixed mortgage rate or paid off their mortgages entirely.1 That has provided a hedge against

54、inflation for homeowners,not renters.The supply of homes for sale is near record lows,which is pushing more wouldbe home buyers to rent instead of buying singlefamily houses.The multifamily market is facing greater headwinds.The pipeline on multifamily construction is at a record high and vacancies

55、are rising(see Chart 6).Unaffordability has forced new college graduates to take on multiple roommates to make ends meet or work from their parents homes.Chart 6:Record pipeline for new multifamily constructionSource:KPMG Economics,Census Bureau.Number of housing units under construction,SA,Thousand

56、s1,00070050030004002000005201020152020January 2023Record high5 units or moreRecessionAs higher rates take a toll on plans to upgrade and expand existing infrastructure,business investment is expected to contract.The purchasing managers surveys show that ma

57、nufacturing activity remained in contractionary territory at the start of the year.The outlier is the vehicle industry,which is still playing catchup due to earlier supply chaindisruptions.Investment in structures is expected to remain suppressed.Firms continue to shrink their office footprints due

58、to hybrid work models with many existing office leases not being renewed.The exceptions are electric vehicles and chip plants,which are both benefiting from governmentincentives.In late 2022,retail inventories ballooned more than those in manufacturing inventories.The liquidation of those inventorie

59、s is expected to suppress production at home and abroad with imports making up a disproportionate share of retail inventories.Government spending is poised to slow,despite a ramp up in infrastructure spending and the largest bump in Social Security payments in history.The politics surrounding the ra

60、ising of the debt ceiling is expected to further slow the pace of government spending in fiscal 2024.The concern is Treasury markets,which remain much less liquid than they were prepandemic.The bond market has grown more skittish,which means we could see more volatility than many expect in response

61、to the brinkmanship leading up to a package to lift the debt ceiling.The trade deficit is expected to narrow.Exports are expected to hold up better than imports.Growth abroad has been surpassing expectations,while a sharp drawdown in inventories will take a toll on imports.Retail inventories are sti

62、ll bloated,with a large share of goods from abroad.The wrinkle in the forecast for the trade deficit is the strong dollar,which works with a lag.That is undermining our competitiveness at home and abroad.During the global financial crisis,the dollar strengthened and trade came to a virtual standstil

63、l.1 https:/www.dallasfed.org/research/economics/2022/1227Global Economic Outlook March 20238 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Inflation proves stickyEscalating geopolitical tensions,a

64、 hardening of country borders,climate change and aging demographics have combined to make the economy more susceptible to supply shocks and prone to bouts of inflation.Core(excluding food and energy)inflation measures have become sticky and more resistant to rate hikes than hoped.Energy prices have

65、come off their highs,which should dampen inflation.The conundrum today is that it is fueling consumer demand elsewhere in the economy,which is setting a floor under inflation.Inflation in the service sector,which is more dependent on the strength of labor,accelerated again at the start of the year,i

66、ncluding everything from vacations to doctors visits and accounting for more than half of all inflation.It is running above 4%on 3,6,and 12month measures double the Feds inflation target.A challenge for the FedThe Federal Reserve is committed to derailing inflation,which requires a chilling of deman

67、d.Main Street picked up at the start of the year,with smaller firms absorbing high profile layoffs at larger firms.The challenge for the Fed is to balance the need to cool the economy with the need for financial stability.Credit markets are now tightening across much of the economy even as financial

68、 markets frontrun the Fed on rate hikes.That tightening of credit conditions we are now experiencing is expected to hit smaller firms with less than 250 employees,residential real estate(builders)and a large chunk of consumer loans hardest.That tightening will eventually show up in a more dramatic p

69、ullback in both employment and demand.The Fed was committed to cooling inflation via a rise in unemployment.The goal was to control that rise and slowly derail inflation,not trigger a deep and more scarring recession.That is a very fine line to walk.We have consistently argued that the one thing tha

70、t would stop the Fed from raising rates is a financial crisis.If the regulators have truly averted a crisis,then rate hikes should continue so that inflation is derailed.Otherwise,the Fed risks stoking a more persistent bout of inflation.Policy uncertainty and the risk of a deeper recession just ros

71、e.Diane SwonkChief Economist,KPMG in the U.S.Global Economic Outlook March 20239 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Canada:Winding down to hit inflation targetA recent downward trend in

72、 inflation signals that Canada may reach the inflation target range of 13%by early 2024.Canadas resilient labor market,especially for skilled labor,continues to support the economy.A key downside risk resides in the potential need for further monetary tightening;however,risks are now more balanced.F

73、ollowing the 2021 rebound,Canadas GDP growth began to experience a slowdown in 2022,in part due to the tightening of monetary policy through most of the year.While the estimated GDP growth for 2022 is closely aligned with the September 2022 forecast,expectations for 2023 have been revised down,refle

74、cting more muted growth than expected in Q4 2022,as well as possible further rates increases this year.The labor market remains strong,especially for skilled labor,and while inflation excluding mortgage servicing costs is back in line with the target range on a monthly basis,core inflation has moder

75、ated from its peak but still remains high.Our models show current momentum is positive for the Canadian economy,which is supported by a resilient U.S.economy and an upward revision to Chinas economic forecast,which would support demand for Canadianresources.Table 2:KPMG forecasts for Canada 20222023

76、2024GDP3.60.71.5Inflation6.83.62.2Unemployment rate5.35.86.1Source:Statistics Canada,KPMG analysis.Note:Average%change on previous calendar year except for the unemployment rate,which is the average annual rate.Global Economic Outlook March 202310 2023 Copyright owned by one or more of the KPMG Inte

77、rnational entities.KPMG International entities provide no services to clients.All rights reserved.Despite remaining below potential,GDP growth is forecast to pick up slightly by 2024,signalling expectations that consumer confidence and investor sentiment will improve from anticipated lower inflation

78、 and Canadas resilience in its labor markets,amongst other factors.In an effort to help steer inflation back to a 2%target and to cool down the economy overall,the Bank of Canada introduced eight consecutive interest rate hikes over the past 12 months,reaching 4.5%by January 2023,the highest value s

79、ince November 2007.The 2022 annualized inflation rate for all items(6.8%)has decreased from its June 2022 peak of 8.1%.At the same time,the annualized inflation rate excluding mortgage costs currently sits below that of all items,hinting at a deceleration of inflation given that mortgage costs are i

80、ntrinsically linked to interest rates.Inflation has started to show some moderation,with a 5.9%headline rate in January 2023.While this headline number is still outside the 13%target range for inflation,there are other signs showing that inflation is moving in the right direction.Over the last three

81、 months,total changes to the CPI,when annualized,show inflation rate much closer to the target range.As this moderation may reflect interest rate increases from the early spring 2022,with later and sharper increases still to be felt,there is some room for inflation to continue moderating.As a result

82、,following its January 2023 interest rate hike,the Bank of Canadas monetary policy stance has now changed from“increase by default,pause if warranted”to“pause by default,increase if warranted”.Notably,as of the most recent interest rate announcement(March 8),this stance has been maintained,with the

83、central bank holding this rate steady for the first time in a year.Based on these developments,inflation is expected to return within the target range of 13%towards the end of 2023 or early 2024.Chart 7:Recent momentum in downward trend in inflationSource:Bank of Canada,Statistics Canada,KPMG analys

84、is.Inflation and policy interest rate,%9%5%6%7%8%4%3%2%1%0%Jan2022MayJunJulAprMarFebNovDecOctSepFebAugJan2023All itemsInterest rateAll items excluding mortgage interest costAll items excluding shelterTarget inflation rangeThe labor market showed resilience in January with headline numbers coming up

85、10 times higher than market expectations.With a monthly gain of 150,000 jobs,this was predominantly concentrated in services subsectors,including wholesale and retail trade(+59,000),health care and social assistance(+40,000)and educational services(+18,000).In contrast,certain sectors that were more

86、 sensitive to interest rates,such as manufacturing(+7,000),had weaker employment gains.Overall,employment across all industries has seen positive growth since September 2022,with accelerated growth in December 2022 and January 2023.Similarly,at a stable unemployment rate of 5.0%,close to its record

87、low(4.9%),and an increase in average hourly wages(4.5%)in headline numbers,Canadas labor market remains strong despite the current economic environment.Labor demand is surpassing supply,particularly in the skilled labor category.In the most recent Canadian Survey on Business Conditions,nearly 40%of

88、Canadian businesses reported upcoming challenges to recruiting and retaining skilled labor over the next three months.Chart 8:Recent momentum in total employment and continued growth in average wagesSource:Statistics Canada,KPMG analysis.Rate,%7%2%3%4%5%6%1%0%-1%-2%-3%Jan2022MayJunJulAprMarFebNovDec

89、OctSepAugJan2023Unemployment rateTotal employment M/M changeAverage wages Y/Y changeGlobal Economic Outlook March 202311 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Risks to the forecast are bro

90、adly balanced,a relative improvement from the September 2022 forecast which saw elevated downside risks.The outlook for the global economy has improved,and the U.S.economy in particular is showing itself to be resilient.This improvement may lead the Federal Reserve to take additional actions to brin

91、g the U.S.economy“back into balance”,which could have negative ramifications for Canada given the deeply integrated trading and economic relationship between the two countries.Similarly,inflation may not return within the target range as expected,resulting in additional monetary tightening by centra

92、l banks.Potentially higher interest rates could further reduce activity on some leveraged or rates exposed sectors,leading to greater employment loss and financial distress for some of the more leveraged households.In other markets,the upward revision to Chinas GDP forecast for 2023 is set to provid

93、e support for global trade,including Canadas resources sector.Overall,increased demand for Canadian resources from one of its main trading partners may result in stronger economic activity and lead to an increase in employment opportunities and wage growth in certain sectors.The current labor market

94、 momentum may also ease the expected effects of a mild recession or slowdown of the Canadian economy.Canadas labor market has shown to be resilient through the pandemic crisis,and recent numbers have demonstrated that the market is still experiencing sustained demand for labor and significant wage g

95、rowth.There may also be stronger economic growth through fiscal stimuli and investment in developed economies,including the dual phenomenon of a transition to a cleaner economy and a readjustment towards areas of geopolitical influence(i.e.,reshoring),which could boost crossborder investment.Karicia

96、 QuirozManager,Economics&Policy at KPMG in CanadaStefano Cimmarusti Senior Consultant,Economics&Strategy at KPMG in CanadaMathieu LabergePartner,Economics&Policy at KPMG in CanadaCaroline CharestPartner,Economics&Strategy at KPMG in CanadaGlobal Economic Outlook March 202312 2023 Copyright owned by

97、one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Brazil:New policies could stoke inflationThe Central Bank of Brazil was among the first central banks to hike rates to combat inflation,having raised them from 2%to 13.75%.Th

98、e reopening of China,Brazils largest trading partner,is the biggest upside risk to growth.Easier fiscal and monetary policies could fuel a higher and more destructive period of inflation down the road.Real GDP growth is forecast to slow to 0.8%in 2023,less than a third of the 3%pace in 2022.Brazil i

99、s expected to narrowly avoid a recession.Growth has slowed in each successive quarter,finishing 2022 in the negative.President Luiz Incio Lula da Silva,widely known as Lula,was elected on a leftleaning agenda.This is the second time that Lula has led the country and he is pivoting from winning to go

100、verning this time round.The country remains deeply divided and politically polarized.For the moment,the President has leaned more to the left in his recent policy agenda than when he departed office in 2016 and those shifts are expected to keep consumption afloat in the near term but at the expense

101、of higher inflation.The President was able to extend pandemicrelated fiscal stimulus.Wage and price subsidies and transfer payments are all expected to support growth in 2023,but not to the extent seen earlier in the recovery.The Brazilian government sets a target budget deficit based on expected gr

102、owth(which was cut in November 2022),making it unlikely that the nation will improve upon last years deficit.The stimulus package will add to consumer spending and increase already bloated government deficits.China is Brazils largest trading partner,accounting for nearly a third of the countrys expo

103、rts according to the Observatory of Economic Complexity(OEC),and its faster than expected reopening and lockdowninduced surge in the households saving ratio are hoped to support growth.Final consumption expenditures in China tightened in 2022,so pentup demand is expected to fuel Brazilian exports.In

104、 a distant second,the U.S.is also expected to play an albeit smaller role,given the forecast for a slowdown in growththere.Table 3 KPMG forecasts for Brazil 202220232024GDP3.00.82.2Inflation9.36.44.9Unemployment rate9.49.08.8Source:KPMG Economics,Instituto Brasieiro de Geografia e Estatistica.Note:F

105、orecasts are dated as of March 6,2023.GDP and inflation are yearoveryear%change.The unemployment rate is an annual average.Numbers are percentages.Global Economic Outlook March 202313 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no servic

106、es to clients.All rights reserved.Chart 9:Exports to China are growing,while other destinations remain flatSource:KPMG Economics,Instituto Brasileiro de Geografia e Estatistica,Banco Central do Brasil/Haver Analytics,OECD.USChinaNetherlandsArgentinaChileExports,Billions US$978654320102014

107、2024200182018RecessionWhile environmentally controversial,Lulas pledge to refine oil domestically will allow the nation to lessen its reliance on imported refined petroleum.This should boost net exports over the long term but will not come to fruition soon.Following nearly a decade of dec

108、lines,foreign direct investment(FDI)into Brazil reversed in 2022.Those increased inflows were driven by tax incentives and a weak currency.The unemployment rate is far below preCovid19 levels and approaching alltime lows since the measure started being tracked and subpar economic growth is expected

109、to push the unemployment rate up again in 2023.Business confidence remains suppressed.Capacity utilization trended down at the end of the year,in step with manufacturing PMIs;they closed out 2022 in contractionary territory.Services PMIs are hanging on to expansionary territory but have been weakeni

110、ng since early to mid2022.The Central Bank of Brazil(BCB)was among the first to hike rates.It ratcheted up the Selic rate(Brazils policy rate)from 2%to 13.75%,where it remains today.The central banks policy rate increases and other risk factors have led to an inverted yield curve,which is seen as a

111、leading indicator ofrecessions.To counter risk of a recession,the President is pushing the BCB to cut rates instead of raising them and lift its inflation target from 3%to 3.5%.Those shifts would undermine the BCBs independence from political interference.Chart 10:The BCB holds the Selic rate high w

112、hile inflation retractsSource:KPMG Economics,Instituto Brasileiro de Geografia e Estatistica,Banco Central do Brasil/Haver Analytics,OECD.Lower inflation targetInflation rateSelic rateUpper inflation targetInflation and interest rates15%12%9%6%3%0%200202023201920212022RecessionThe risk is

113、 that shifts to stimulate growth will come at the expense of higher inflation,both in the near and long term.The Presidents decision to abandon fiscal rules and move away from reforms aimed at reducing borrowing costs,improving productivity and fostering competition could further undermine confidenc

114、e in the countrys economicpolicies.Inflation decelerated from above 9%to below 6%at yearend 2022.Core inflation,which strips out food consumed at home deregulated prices,ended the year at 5%,which is still a long way from the BCBs 3%target.Inflation was formerly expected to return to its 3%target in

115、 2024;however,this now seems a stretch.Demand remains weak,the inflow of FDI could once again reverse and the Brazilian real could further depreciate.That could stoke inflation and balloon government deficits.Given the loss of confidence we have already seen in the business sector,the hope is that t

116、he government reverses some of its most extreme policies.Otherwise,borrowing costs for corporations and the government will remain high for a longer period which could raise the risk of default.Ben ShoesmithResearch Economist,KPMG in the U.S.Global Economic Outlook March 202314 2023 Copyright owned

117、by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Mexico:Policy headwinds make for muted growth Stronger economic momentum at the end of 2022 slightly boosts growth prospects for 2023,but headwinds mount.A mild recession

118、is likely due to the interconnectedness with the U.S.,Mexicos largest trading partner.Inflation pressures are easing,while the pesos strength is expected to continue through 2024.Rate cuts are likely this year.Mexico,Latin Americas second largest economy according to the World Bank,is expected to gr

119、ow at a 0.9%pace in 2023,a slowdown from 3.1%pace,as seen in 2022.Consumption both by households and the public sector is expected to drive growth,while investment and trade are set to provide some offset.The U.S.,Mexicos largest trading partner,is set to suffer a mild contraction midyear,according

120、to our forecast.“Friendshoring”investments are boosting Mexicos longterm economic growth prospects;policy uncertainty for foreign investors remains sand in thegears.Consumer spending,which is about twothirds of the overall economy,is forecast to rise by 0.3%in 2023.Rising minimum wages and recordhig

121、h remittances have boosted consumption in recent years,but high inflation,record tightening of monetary policy and a loss in tourism due to the U.S.recession are expected to derail income gains.Exports are forecast to be a drag on growth.This is largely in response to a slowdown in the U.S.,which ta

122、kes up about 80%of Mexicos exports.Due to Mexicos proximity to United StatesMexicoCanada Agreement(USMCA)partners,it is benefitting from reduced investment in China.Legacy manufacturing,such as automobiles and textiles,is being supplemented by an increased desire to produce semiconductors and green

123、energy components,such as batteries.There have been more announcements from companies on increasing their manufacturing presence,especially in the north of thecountry.Foreign direct investment(FDI)rose by 12%in 2022 to a level of USD 35 billion(see Chart 11).Roadblocks to increased FDI include uncer

124、tainty over the outlook for the energy sector and more hostile government policies.The leftleaning government of Andrs Manuel Lpez Obrador(AMLO)has yet to make its agenda for investment clear.Table 4:KPMG forecasts for Mexico 202220232024GDP3.10.91.6Inflation7.84.53.9Unemployment rate3.43.63.8Source

125、:KPMG Economics,Instituto Nacional de Estadstica Geografa e Informatica(INEGI).Note:Forecasts are dated as of March 6,2023.GDP,inflation,&the unemployment growth rates are annual averages.Numbers are percentages.Chart 11:Mexico FDI highest in seven years in 2022Source:KPMG Economics,Banco de Mexico.

126、Foreign direct investment,nominal billions,USD$50$20$30$40$10$020002002200420062008200022$18$30$25$21$32$30$18$26$22$27$30$36$48$34$34$31$28$32$35$35$18$26$24Global Economic Outlook March 202315 2023 Copyright owned by one or more of the KPMG International entities.KPMG Interna

127、tional entities provide no services to clients.All rights reserved.The U.S.and Canada are currently embroiled in a trade dispute with Mexico over restrictions of private investments in energy,which is in violation of their USMCA trade agreement.Increased demand for manufacturing translates into more

128、 energy needs,which Mexico cannot meet with its current infrastructure.In the public sector,a positive current account balance and a below50%debttoGDP ratio reduce the risks of sovereign default,even with a mild recession.The government deficit is expected to narrow to 0.2%of GDP in 2023.The expirat

129、ion of food and fuel subsidies,which were used to counter escalating costs,will help reduce the deficit.The unemployment rate is expected to rise to 3.6%by the end of the year,after hitting a multidecade low of 2.9%in January 2023.A doubledigit annual increase in the minimum wage level has boosted h

130、ouseholds finances,but high inflation is taking a bite out of those gains.Remittances(which make up about 4%of GDP)hit a record high in December of 2022 after rising sharply in 2020 and 2021.With many remittances coming from the U.S.,an appreciation of the peso relative to the U.S.dollar has eroded

131、the purchasing power associated with thosetransfers.Inflation remains sticky;the drop in core goods inflation is slowing,while core services inflation is accelerating(see Chart 12).In response to aggressive rate hikes by Banxico,Mexicos central bank,overall inflation is expected to cool to 4.5%by th

132、e end of 2023.Chart 12:Inflation remains stickySource:KPMG Economics,INEGI.RecessionPercentage change,year/year12%10%8%6%4%2%0%Jan2019Jan2023Jan2020Jul2019Jul2020Jan2021Jul2021Jan2022Jul2022CPI core servicesCPI coreCPI core goodsBanxico surprised markets in February by hiking rates by 50 basis point

133、s(instead of the expected 25),signaling that more hikes are on the table.Rising core inflation is a concern for the bank,with January data showing inflation rising at an 8.45%annual pace,significantly higher than the banks 3%target.The bank has raised the shortterm rate to 11%,or 700 basis points hi

134、gher since the start of their hiking cycle in mid2021.Banxico is expected to hit a peak in shortterm rates of 11.5%by late spring and to cut rates at the end of 2023,earlier than the U.S.central bank.Mexico is expected to lag many of its Latin American counterparts in 2023 and to rebound slightly in

135、 2024.The growth trajectory remains below its potential.Policy missteps and a lack of clarity on investment policy by AMLO are expected to crimp growth in the private sector.Mexicos greatest asset is that it is seen as a safer bet for offshoring than China;evidence of“friendshoring”is emerging.The U

136、SMCA trade pact,which Mexico ratified before its Northern neighbors,is playing a key role in those shifts.Yelena MaleyevEconomist,KPMG in the U.S.Global Economic Outlook March 202316 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no service

137、s to clients.All rights reserved.China:Domestic demand as the key for recoveryWith a rapid exit from the zeroCovid policy,the reopening last December has accelerated Chinas economic recovery,which we expect to continue this year.Consumption is expected to be a key driver of growth this year,supporte

138、d by improving income growth,consumer confidence,and mobility.China is accelerating its establishment of a modern industrial system.We expect manufacturing investments,digitalization,and energy transition,to see rapid growth in 2023.Chinas GDP grew 3.0%in 2022.Headwinds such as the highly transmissi

139、ble Omicron variant of Covid19,continued slowdown of the real estate market,rapid interest rate hikes by the U.S.Fed,and geopolitical uncertainty,weighed on the Chinese economy last year.Meanwhile,despite slower economic growth,the size of Chinas GDP reached RMB 121 trillion(USD 18 trillion),undersc

140、oring Chinas growing importance to the global economy.The countrys annual Government Work Report(GWR),delivered at the 14th National Peoples Congress in March,set a GDP growth target at“around 5.0%”for 2023,slightly lower than market expectations.Although it was the lowest growth target set in sever

141、al decades,it is still an ambitious goal considering the large size of the Chinese economy.The target is also still higher than the expected growth of many major economies.Looking ahead,after a rapid exit from the zeroCovid policy,China is shifting its priority to improving economic growth.We expect

142、 Chinas economy to continue to recover and grow by 5.7%this year.Meanwhile,the global economy is facing increasing headwinds.With Chinas growth rate accelerating from last year,we expect it to be a key engine of global growth again this year.Table 5:KPMG forecasts for China 202220232024GDP3.05.75.2I

143、nflation2.02.42.2Unemployment rate5.65.35.2Source:Wind,KPMG forecasts.Average%change on previous calendar year except for the unemployment rate,which is the average annual rate.Inflation measure used is the CPI,and the unemployment measure is the surveyed unemployment rate.GDP growth,%year-on-year25

144、%15%20%10%5%0-5%-10%20021620222023Forecast2023:5.7%Chart 13:Chinas real GDP growthSource:Chinas National Bureau of Statistics,Wind,KPMG forecast.Global Economic Outlook March 202317 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entiti

145、es provide no services to clients.All rights reserved.Employment stabilization is an important policy target and is critical for restoring market confidence.According to the GWR,China set a target of creating around 1,200 million new urban jobs this year,the highest target in history.And the target

146、for the urban unemployment rate this year is“around 5.5%”.With a record 11 million students graduating from colleges this year,the government is giving special attention to support the youth labor market.We expect the unemployment rate to average 5.3%in 2023.The relaxation of pandemic restrictions s

147、tarting from December 2022 has accelerated Chinas economic recovery.Recent data showed a strong rebound after the Chinese New Year holidays.Road traffic saw more congestion than the same period in 2019 before the pandemic,reflecting normalization of economic activities.Meanwhile,the manufacturing Pu

148、rchasing Managers Index(PMI),a leading indicator of industrial production,returned to the expansionary territory and reached 52.6 in February,the highest reading since May 2012(see Chart 14).Industrial activities are expected to continue to recover.The government is prioritizing the recovery and exp

149、ansion of domestic consumption.Consumption is expected to be a key driver for Chinas growth this year.Consumer spending,especially for services and discretionary,will likely see a stronger rebound.Holiday spending during the 2023 Chinese New Year holiday saw a solid recovery.Movie box office totalle

150、d over RMB 6.76 billion,the second highest in history 1.Service PMI also saw a strong rebound,jumping 14.7 percentage points in February from the depressed level last December.As services account for nearly half of Chinas consumption,its recovery is important for the rebound in consumption.In additi

151、on,we estimate that Chinas households have accumulated RMB 10 trillion of excess savings compared to the historical trend,as they became more cautious on spending and mobility restrictions also reduced consumption scenarios.The reopening and economic recovery will help improve consumer confidence an

152、d some of the excess savings may be released,which should support the recovery in consumption.On the investment side,we expect technology upgrading and green transformation to support manufacturing investment.Infrastructure investment should remain solid,but its growth will be limited by local gover

153、nments fiscal conditions.Meanwhile,the real estate investment is expected to stabilize this year and become a lesser burden to overall growth.Chart 14:Purchasing Managers IndicesSource:Wind,KPMG analysis.Index6050554540353025200201320222023ServicesManufacturing1 http

154、s:/ Economic Outlook March 202318 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Exports used to be Chinas key growth engine during the past three years,but the trend has started to reverse.Chinas

155、exports have declined for five consecutive months since last October and the weakness is expected to continue as the global economy slows.Despite the slowdown,the product mix of Chinas exports is changing with increasing highend manufacturing.Driven particularly by strong demand of new energy vehicl

156、es,China exported over 3 million vehicles last year,up by 54%and becoming the second largest auto exporter after Japan.Meanwhile,as the Regional Comprehensive Economic Partnership(RCEP)strengthening intraregion cooperation,Chinas exports to ASEAN economies still maintained robust growth,accounting f

157、or 15.8%of total exports in 2022,up by 1.4 percentage points from 2021.The trend of Asian Pacific economic integration is expected to continue to strengthen.China is expected to maintain an accommodative policy stance to boost growth.Fiscal support measures will be stepped up and be more effective.T

158、he government set a fiscal deficit ratio at 3.0%,0.2 percentage points higher than last year.In addition,RMB 3.8 trillion local government special bonds will be issued to supplement government spending,an increase of RMB 150 billion from last year.China will continue to adopt supportive monetary pol

159、icy,particularly in targeted areas including expanding liquidity and applying special relending facilities to increase financial support to SMEs,green investment,technology,and elderly care.We expect Chinas CPI inflation to remain mild at 2.4%in 2023.Despite multiple challenges,Chinas foreign direct

160、 investment(FDI)rose 8%in 2022.However,it may not be easy to keep up the momentum in light of slowing global growth and increasing geopolitical challenges.To attract FDI,the government strives to further increase market access and expand institutionbased opening up.In the latest catalogue for encour

161、aged FDI,effective this year,it added over 200 items to the list and gave special priorities to foreign investment in advanced manufacturing,modern services,energy efficiency and environment protection,and scientific innovations.The Hong Kong(SAR)economy is also expected to recover in 2023.An expect

162、ed strong rebound of tourism from the Chinese Mainland should support an acceleration of services consumption.While weak global demand will continue to pose pressure to Hong Kongs exports,the removal of crossborder travel restrictions and an expected faster growth of the Chinese Mainland economy sho

163、uld help Hong Kongs economy.We expect that Hong Kongs economic growth will return positive,after falling by 3.5%in 2022.Meanwhile,Hong Kong is accelerating its economic integration with the Chinese Mainland and the development of the GuangdongHong KongMacao Greater Bay Area(GBA)continues to gain tra

164、ction.Kevin Kang,PhDChief Economist,KPMG ChinaGlobal Economic Outlook March 202319 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Japan:Recovery stifled by rising prices and global headwindsA weake

165、ning global economy and a slowdown in consumer spending weighs on economic recovery driven by pentup demand.Inflation expected to moderate from a peak early in 2023 as the influence of global factors on inflation recedes.Bank of Japan is likely to maintain an ultraloose stance of monetary policy.Jap

166、an faces a mixed outlook as the ongoing recovery in the domestic economy is set against weaker global growth and consumers cutting back on spending plans in response to rising prices.Revised data for 2022 showed no GDP growth in the three months to December 2022,following on from a 0.3%contraction i

167、n the preceding quarter.We expect GDP growth to reach 1.1%in 2023,accelerating to 1.2%in 2024.Japans manufacturing sector has seen a steady deterioration in demand driven in part by weaker demand from a slowing global economy.In February 2023,the level of the Purchasing Managers Index(PMI)for manufa

168、cturing fell to 47.7(see Chart 15)indicating the fastest pace of contraction in the sector since September 2020.While we expect continued weakness in the first half of 2023,a partial recovery in the global economy as well as an easing of supply chain frictions early this year could provide a boost t

169、o Japans manufacturing sector in the second half of 2023.In contrast,sentiment in the service sectors has been more robust at the start of 2023,with the February PMI survey for services pointing to the fastest pace of expansion for eight months.The easing of Covid19 restrictions in 2022 has also pro

170、mpted a partial recovery in Japans tourism sector,which saw January 2023 visitor numbers reach 56%of the average levels seen in 2019.While some restrictions of visitors from China remain in place 1,a complete recovery may take some time,but is nevertheless expected to support growth during 2023.Tabl

171、e 6:KPMG forecasts for Japan 202220232024GDP1.01.11.2Inflation2.52.91.0Unemployment rate2.62.42.4Source:Cabinet Office of Japan,Ministry of Internal Affairs and Communications,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Infla

172、tion measure used is CPI.Chart 15:Stronger service sector output is offset by weakening growth in manufacturingSource:S&P Global.PMI index,values below 50 indicate contraction604550554035302520Jan2019Jan2021Jul2021Jan2022Jul2020Jan2020Jul2019Jan2023Jul2022ServicesManufacturing1 Arrivals from China t

173、o Japan are required to show proof of a negativePCR test as well as Chinas continuing ban on package tours.Global Economic Outlook March 202320 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.In Jan

174、uary 2023,Japans consumer price inflation reached 4.3%,its highest level for more than 40 years.Rising costs of domestic energy and higher food prices were the main drivers.We expect the impact of both factors to diminish over the course of this year,leading to a steady decline in inflation this yea

175、r(see Chart 16).Overall inflation is expected to average 2.9%this year,and 1%in 2024.We expect base rates to remain at current low levels and the overall stance of monetary policy to stay accommodative throughout the next two years.While higher inflation offers an opportunity to exit the ultraloose

176、monetary policy regime,the Bank of Japan appears reluctant to do so,as an early tightening of monetary policy could risk inflation falling back to below its 2%target in the longer term.Historically,the Japanese economy has suffered from persistent weakness in domestic demand and low levels of inflat

177、ion,while the Bank of Japan maintained a low level of base interest rates and engaged in unconventional monetary policies.Some tweaks to monetary policy may be inevitable this year,in particular to Yield Curve Control(YCC),which could see a further increase in the target bands from their current lev

178、el.This policy forms a part of“Quantitative and Qualitative Easing”under which the Bank of Japan intervenes in bond markets to ensure that the yields for 10year government bonds are within a band of 0.5 percentage points from 0%.The current bands were set in December 2022,from a narrower band of 0.2

179、5 percentage points around the 0%level(see Chart 17).Longterm bond yields have consistently stayed at or above the upper targeting band for the past year and could prompt further increases in the target band in the future.Chart 16:Outlook for Japans inflationSource:Ministry of Internal Affairs and C

180、ommunications,KPMG analysis.Consumer price inflation,%YoY5%3%4%2%1%0%-1%-2%20022200232024ForecastChart 17:Japans 10-year yield has remained at or above the cap imposed by the Bank of Japan Source:Ministry of Finance of Japan,KPMG analysis.Benchmark government bond yield,%p.a.0.

181、6%0.4%0.2%0%-0.2%-0.4%-0.6%Mar2022Sep2022Nov2022Jul2022May2022Jan2023Mar202310-year5-year1-yearTarget band for 10-year yieldGlobal Economic Outlook March 202321 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All right

182、s reserved.A more comprehensive policy review is a distinct possibility,especially as the Governorship of the Bank of Japan passes from Mr Haruhiko Kuroda to Dr Kazuo Ueda in April 2023.A February survey of Bond Market participants showed 64%of respondents reporting a“low”level of market functioning

183、 as the Bank of Japan has taken on an increasingly larger stake of government bond ownership.The extent of the Bank of Japans interventions has in some cases led it to increase its holdings of government bonds to over half of those issued and over 100%2 for some recent issues of longterm bonds.Japan

184、s labor market remains tight with Januarys unemployment rate of 2.4%in line with 2019 averages.High inflation and increasing competition for talent have pushed annual increases in cash earnings to 2.24%3 in the three months to January 2023.We expect the overall rate of unemployment to remain at 2.4%

185、throughout this year andnext.Our overall outlook for the Japanese economy shows a modest pace of recovery alongside a slowing pace of inflation.While the Bank of Japan continues to pursue loose monetary policy,we judge that inflation in 2024 may undershoot the target of 2%and more policy action may

186、be needed before it returns to sustainably to target.Dennis TatarkovSenior Economist,KPMG in the UK2 Through securities lending aimed at enhancing market liquidity and repurchases.3 Ministry of Health,Labor and Welfare,establishments with five or more employees.Global Economic Outlook March 202322 2

187、023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.India:Cautiously shining amid global uncertaintyIndias domestic demand expected to be a key driver for economic growth.Strong capital expenditure push

188、seen from the government to promote investments and job creation.Global geopolitical tensions and a slowdown in the global economy remain a risk to the outlook.The effects of the slowdown in global economic growth resulting from high inflation and the continuing war between Russia and Ukraine are al

189、so seen to be affecting Indias economic performance.The country recorded muted growth of 4.4%in Q4 2022 compared to 6.3%in Q3 2022,with sluggish private consumption and exports being the major reasons behind that.The countrys real GDP growth in the fiscal year 202223 is estimated at 7.0%in compariso

190、n to 9.1%in the prior year.However,some demand indicators such as record sales of 3.8 million in the passenger vehicles segment in 2022 1,strong growth in tractor sales,and a rise in domestic air travel,continue to support economic growth.Table 7:KPMG forecasts for India 202220232024GDP7.06.46.9Infl

191、ation6.55.34.4Unemployment rate7.56.05.4Source:Ministry of Statistics and Programme Implementation,CMIE,KPMG forecasts.Note:The years represent the AprilMarch period,for instance,2022 spans from April 2022 to March2023.Chart 18:Indias quarterly GDP growthSource:RBI and National Statistical Office.Fo

192、recastGDP growth,%year-on-year25%20%15%10%5%0%-20%-15%-10%-5%-25%Q2Q3Q4Q1Q2Q4Q1Q2Q3Q3Q4Q1Q1Q2Q4Q3Q1Q2Q4Q320023202420201 “Auto Industry Sales Performance of December 2022,October December 2022,AprilDecember 2022 and January December 2022”,SIAM,13 January 2023,as accessed on 1 March 2023.Gl

193、obal Economic Outlook March 202323 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Despite the sluggish growth in the latest quarter,we still expect India to be one of the major beacons of growth in

194、 2023,driven by strong domestic demand and government expenditure.The efforts of the Union Budget 202324 to improve the disposable income of taxpayers in the country is expected to boost consumption via an increase in discretionary spending.In addition,the strong capital expenditure push provided by

195、 the Union Budget,with an increased outlay of 37.4%in comparison to the fiscal year 202223,is expected to drive growth,investments,and job creation.The governments reduction of over 39,000 compliances and decriminalization of over 3,400 legal provisions will also foster the ease of doing business in

196、 the country.2 Strong credit growth and resilience in financial markets are further expected to create an environment that supports investments.Chart 19:Indias Consumer Price IndexSource:Ministry of Statistics and Programme Implementation.Note:Inflation rate for the month of January 2023 is provisio

197、nal.CPI inflation,%year-on-year9%2%3%4%5%6%7%8%1%0%MarMayAprJunAugJulSepNovDecOctFeb2022Jan2023A high unemployment rate,however,remains a concern for India,standing at 7.5%in February 2023.Inflation,which was falling since October 2022,spiked again to 6.5%in January 2023 driven by high food prices,b

198、reaking the Reserve Bank of Indias(RBI)upper tolerance limit,though still below the elevated levels seen during the first half of 202223.The RBI is focused on the withdrawal of accommodation aimed at controlling inflation,with policy repo rates hiked six times since May 2022.The ongoing global geopo

199、litical tensions and higher demand from various countries lifting Covid19 related mobility restrictions are also expected to affect commodity prices.Core inflation is expected to be affected by the continued transfer of input costs to output prices,particularly in the services sector.However,input c

200、osts and output prices are expected to ease in the manufacturing sector.Taken together,the RBI projects inflation at 6.5%for 202223 and 5.3%for 202324.A robust domestic demand and favorable government initiatives are expected to help India remain as one of the fastest growing major economies globall

201、y.However,external challenges,such as a slowdown in the global economy and monetary tightening in advanced economies,are factors that could affect the countrys growth.Preeti SitaramDirector,Government&Public Services,KPMG in India2 Budget 20232024,Speech of Nirmala Sitharaman,Minister of Finance,Gov

202、ernment of India,1 February 2023,as accessed on 1 March 2023.Global Economic Outlook March 202324 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Germany:Europes largest economy to escape recessionG

203、erman economy to gradually recover in the second half of 2023.Inflation rate to fall in the medium term.Labor market to remain robust and stabilize private consumption.The war in Ukraine,ongoing supply chain disruptions,and the energy crisis weighed on the German economy in 2022.Gross domestic produ

204、ct grew by 1.8%,thanks in particular to private consumption,which grew by 4.3%.Consumers spent almost as much as before the Covid19 pandemic with people making up for what they could not do during the pandemic:travel,visits to restaurants,cultural experiences,celebrations,trade fairs,etc.Despite the

205、 0.4%contraction in GDP in Q4 2022,the slowdown in economic momentum is likely to be shorter and milder than originally expected.Relief packages from the German government,particularly in the form of the gas and electricity price brakes,could save the German economy from a recession in 2023.These su

206、bsidies will also have a dampening effect on the rise in consumer prices.After reaching its lowest point in September 2022,business sentiment is brightening again.Companies have been more upbeat about both their business situation and expectations in recent months.This is on the one hand due to the

207、lower producer prices in the manufacturing sector,which have a positive effect for the industry in purchasing.On the other hand,the energy price brakes announced and imposed at the turn of the year have provided some reassurance forcompanies.The RussiaUkraine war and the associated explosion in ener

208、gy prices are estimated to have cost Germany around 2.5%,or EUR100 billion,in economic output in 2022.Germany is economically more affected by the crisis than other countries due to its high dependence on Russian energy,a high share of energyintensive industry,and greater reliance on exports and glo

209、bal supply chains.This is also reflected in the foreign trade figures.Due to the sharp rise in energy prices,Germanys trade surplus was lower last year than at any time since the turn of the millennium.Although more goods were again exported than imported,the foreign trade balance halved.Table 8:KPM

210、G forecasts for Germany 202220232024GDP1.80.11.4Inflation6.96.12.2Unemployment rate3.03.12.8Source: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.Global Economic Outlook March 202325 20

211、23 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The energy crisis is also burdening the construction industry.Prices for building materials remain at historically high levels,especially those which ar

212、e energy intensive.Other factors,such as rising interest rates,supply bottlenecks,and a lack of skilled workers,are also clouding the investment climate and slowing down new construction and renovation activities.The number of building permits is falling rapidly,and more and more companies are cance

213、lling already planned construction projects.Although the order backlog in the construction industry remains high,there have been more and more cancellations recently.The construction industry is therefore pessimistic about 2023 and expects a real decline in turnover of around 7%for theyear.Chart 20:

214、ifo Business Climate Index for GermanySource:ifo Institute.Index5807570Jan2022MarMayJulSepNovJan2023Business climateBusiness situationBusiness expectationsChart 21:Electricity and natural gas import price indexSource:Destatis.Index1,6001,4001,2001,0008006004002000Jan2021AprJulOctAprJulOct

215、Jan2022Jan2023Electricity import price indexNatural gas import price indexSet against that,consumer sentiment in Germany is on the road to further recovery.Recently lower prices for energy,a labor market that remains stable and the possibility that a recession in Germany could be avoided,are slowly

216、bringing optimism back.Nevertheless,German consumers must cope with a hit to their real disposable incomes due to high inflation,which could also affect their propensity to spend.Real incomes fell by 4.1%in 2022,more sharply than everbefore.After inflation in Germany reached its highest level last y

217、ear since the reunification,various effects are contributing to a gradual easing of the price pressures.These include the governments gas and electricity price brakes which provide relief for both industry and private households.In addition,base effects,which are taking effect from March,will also h

218、ave a positive impact on inflation.Manufacturers also lowered their prices in January for the fourth time in a row.Producer prices,which are currently driven primarily by expensive energy,are considered a precursor to the development of the cost of living.However,the inflation rate remains at a high

219、 level,and secondround effects from strong wage and salary increases areforeseeable.The persistently high price level,geopolitical uncertainty,rising interest rates and disrupted supply chains continue to weigh on businesses and consumers.However,the absence of the feared gas shortage,coupled with a

220、 falling inflation rate,government subsidies,and stabilizing foreign trade paint an improved outlook for the German economy.Overall,we expect activity to gradually stabilize in 2023 and continue to grow in 2024.Dr.Ventzislav KartchevHead of Business Intelligence/Markets,KPMG in GermanyGlobal Economi

221、c Outlook March 202326 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Austria:Mild recession,slow recovery After strong 2022 growth,the probability of entering a technical winter recession has rise

222、n.Aboveaverage fiscal support leads to well aboveaverage Eurozone inflation.Tradeoff between further support and fiscal consolidation to dominate the 2023 outlook.Following strong growth in the first half of 2022,the Austrian economy has slowed down significantly.High inflation has dragged on consum

223、ption and investment,causing GDP to stay flat in Q4 2022.Industrial production also came down significantly.As this decline is expected to have continued,the probability of Austria entering a technical recession remains high,with economic sentiment indicators as well as the Purchasing Managers Index

224、 substantially below their longterm averages.Despite the slowdown,Austria recorded aboveEurozone average growth of 5.0%in 2022.Looking ahead,although growth is set to benefit from a recovery in real disposable incomes as energy prices moderate and wages increase,the outlook remains mixed.Increasing

225、labor shortages,combined with falling industrial production and generally low economic sentiment,are expected to weigh on the growth momentum.Table 9:KPMG forecasts for Austria 202220232024GDP5.00.11.4Inflation8.66.32.8Unemployment rate4.84.94.6Source:Bloomberg,Statistik Austria,KPMG forecasts.Note:

226、Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the HICP.Global Economic Outlook March 202327 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients

227、.All rights reserved.Chart 22:Average monthly electricity wholesale price in AustriaSource:Statista.Average price per megawatt-hour,EUR6005004003002001000Jan2019Jul2019Jan2020Jul2020Jan2021Jul2021Jan2022Jan2023Jul2022Rising interest rates have turned out to be an additional dampening factor.Thanks t

228、o ongoing and strong fiscal support,as well as a resilient labor demand,we expect the recession to be mild,followed by a moderate upswing.While negative growth for full year 2023 seems unlikely,we forecast the Austrian economy to stagnate(0.1%).In view of the large number of economic policy challeng

229、es ahead,only a slight acceleration in economic activity to 1.4%growth in 2024 is anticipated.Turning to inflation,Austria experienced the same pressures as other European countries with a strong dependence on Russian gas,driving up energy prices.Moreover,wage settlements in recent months have resul

230、ted in pay growth slightly above the inflation rate,leading to additional pressure on prices,resulting in an annual inflation rate of 8.6%in 2022.However,while heavy fiscal support has helped to hedge against a downturn,it has also pushed up inflation.While Eurozone inflation eased to 8.5%in Februar

231、y,Austria recorded a higher rate of 11%(seeChart23).We expect inflation to stay elevated over the forecast horizon,with significantly stronger price increases than Eurozone average.Nevertheless,with energy prices set to moderate throughout 2023,headline inflation is forecast to average 6.3%.In 2024,

232、core price developments are set to moderate,with inflation projected at 2.8%.Chart 23:Inflation rates in Austria and the EurozoneSource:Eurostat.Annual HICP inflation,%12%10%8%6%4%2%0%EurozoneAustriaJan2022MayJunJulAprMarFebFebNovDecOctSepAugJan2023Despite the slowdown in economic activity,the seaso

233、nallyadjusted unemployment rate remains low and was flat at 4.8%in January 2023.The high number of job vacancies counteracts the negative effects of the economic slowdown.After averaging 4.8%in 2022,we expect the unemployment rate to stabilize at 4.9%in 2023 amid cyclical fluctuations during the yea

234、r.For 2024,despite the moderate pace of recovery,we expect a slight decline to 4.6%due to slower growth in the labor force.Despite its inflationary side effects,the structure and size of the fiscal support measures are set to be reviewed in 2023.Rent ceilings and further measures to address purchasi

235、ng power are on the table.The tradeoff between further support and rising debt is expected to be in the focus of political debate in 2023,determining the longerterm growth path for the Austrian economy.Dr.Stefan FinkChief Economist,KPMG in AustriaGlobal Economic Outlook March 202328 2023 Copyright o

236、wned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Switzerland:Testing the frontiers of resilienceSwitzerland will not be able to escape the international trend of declining economic performance entirely in H12023.A r

237、ecession is likely avoidable due to the relatively high resilience of the Swiss economy,followed by moderate growth in 2024.Price pressures are increasing,and although inflation is far below its peers monetary policy reaction is expected.The Swiss economy lost steam in the last quarter of 2022 amid

238、tighter monetary policy and a slowdown across major export destinations.GDP growth stagnated in Q4(0.0%),after growing at 0.2%in Q3.The Swiss growth dynamic has therefore aligned with the big European picture.Potential stress in the banking system leaves the economy vulnerable to further uncertainty

239、 and shocks.Slowing growth rates in the international environment in general,and core Swiss trade partners,dampened export dynamics,which had significant impact on the manufacturing sector,albeit coming from a very high level.Following strong data for manufacturing PMIs in early 2022,industrial dyna

240、mics slowed down,though still remaining in expansionary territory(see Chart 24).Strongest support came once more from the chemicalpharmaceutical industry.The Swiss industry left expansionary path in early 2023,where manufacturing PMI numbers started to worsen into a negative growth region(49.3 in Ja

241、nuary,with further slowdown to 48.9 in February).Sectoral dynamics have not been homogeneous.While services PMIs in Q1 joined strong manufacturing figures(60.2 in March 2022),the drop came somewhat sooner,with 49.5 in December,consistent with negative services growth.However,the sector has recovered

242、 quickly,with services PMIs returning to positive territory in January and February 2023(56.7 and 55.3,respectively).Table 10:KPMG forecasts for Switzerland 202220232024GDP2.10.31.4Inflation2.82.31.3Unemployment rate2.12.42.3Source:Eurostat,SECO,KPMG forecasts.Note:Average%change on previous calenda

243、r year except for unemployment rate,which is average annual rate.Inflation measure used is the CPI.Chart 24:Purchasing Managers indices for SwitzerlandSource:procure.ch,Credit Suisse.CH3 PMIIndex706560555045Manufacturing PMIServices PMISep2021MayJulSepMarJan2022NovNovJan2023Global Economic Outlook M

244、arch 202329 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Chart 25:Consumer sentiment index in SwitzerlandSource:SECO.Index20010-10-20-30-40-50200202002320212022The strong la

245、bor market is a supportive factor,although it could mask the structural issues of labor shortage,which turn out to be a central risk factor for the Swiss economy.2022 saw the development of a labor market increasingly characterized by a shortage of workers and an unemployment rate of 2.1%.The unempl

246、oyment rate fell in 2022 by 0.5 percentage points(from 2.6%in 2021)to its lowest in 20 years.In Q4 2022,labor compensation increased slightly stronger than consumer prices(which were flat in Q4),while higher purchasing power supported private consumption.This is also reflected in consumer sentiment

247、figures;although still being in negative territory,consumer sentiment improved from 47 in October 2022 to 30 in January 2023(see Chart 25).That makes the Swiss consumption dynamic significantly stronger than in the Eurozone.Nevertheless,price increases are a challenge for Switzerland as well.Energy

248、price increases as well as the impact of supply chain shortages in Europe have both had an impact on the economy,although the Swiss inflation is still far below its European peers.The latest figures showed a reacceleration of inflation,with February CPI coming in at 3.4%,close to the peak of 3.5%in

249、August 2022 and far above the Swiss National Bank inflation target.Chart 26:Inflation in Switzerland and the EurozoneSource:Bloomberg.EurozoneSwitzerlandAnnual inflation,%12%8%10%6%4%2%0%-2%20020200212022This increases the pressure on the Swiss National Bank(SNB)for further int

250、erest rate hikes.The main refinancing rate,being at 1.00%at the beginning of March,is expected to rise further.Nevertheless,as Eurozone interest increases are expected to be higher,the interest rate differential between the Eurozone and Switzerland is expected to increase,lowering the pressure on th

251、e Swiss franc versus the euro.In this environment,we forecast Swiss GDP growth of 0.3%in 2023,followed by a 1.4%increase in 2024.Although the inflation rate is clearly above 2%in Q1 2023,average CPI inflation is expected to be 2.3%for 2023.Afterwards,we expect a deceleration to 1.3%on average in2024

252、.The resilient labor market is expected to persist,with the unemployment rate only marginally rising in 2023.We expect an unemployment rate of 2.4%in 2023,followed by 2.3%in 2024.Overall,the Swiss economy proves to be resilient to the different kinds of external headwinds,most likely avoiding recess

253、ion in 2023.Nevertheless,it wont be able to fully escape the dampening impact from the international environment and geopolitical risks.Dr.Stefan FinkChief Economist,KPMG in AustriaGlobal Economic Outlook March 202330 2023 Copyright owned by one or more of the KPMG International entities.KPMG Intern

254、ational entities provide no services to clients.All rights reserved.France:Economic outlook clouded by inflationary pressuresRecession avoided thanks to resilient business sentiment and government support.Inflation to peak later on the back of delayed transmission of energy prices.Tightness in the l

255、abor market set to ease from a weakening economy.The French economy was resilient in 2022,despite the global headwinds from the war in Ukraine,rising energy prices,and supply chain disruptions.GDP grew by 2.6%compared to 2021,supported by broadbased expansion across the domestic demand,while net tra

256、de subtracted 0.8 percentage points from growth on the back of strong imports(see Chart 27).France has so far been relatively insulated from rising energy prices thanks to its reliance on nuclear energy,low dependence on Russian gas,and the governments measures to protect households and businesses f

257、rom the immediate increase in utility bills.Table 11:KPMG forecasts for France 202220232024GDP2.60.41.1Inflation5.96.42.4Unemployment rate7.37.37.5Source:INSEE,Eurostat,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation me

258、asure used is the HICP.Chart 27:Outlook for the French economySource:INSEE,Refinitiv Datastream,KPMG analysis.Contributions to annual GDP growth,percentage points84620-2-4-8-6GDPConsumptionGovernmentInvestmentNet tradeOther(inc.stocks)Forecast20002320242022Global Economic Outlo

259、ok March 202331 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Chart 28:French business sentiment has held up better than consumer confidenceSource:INSEE.Balance,normalized to 0908070605

260、0402000202023Consumer confidenceBusiness climateMore recent data have been less encouraging.Growth slowed to just 0.1%in Q4 2022 following growth of 0.2%in Q3 2022.The slowdown was primarily driven by a deterioration in household consumption,which fell by 1.2%.Consistent with t

261、hat,consumer sentiment remains close to its alltime lows,with weakness across households perception of their personal financial situation,standard of living,and appetite for major purchases(see Chart 28).Set against that,business surveys point to some shortterm momentum at the start of 2023,which is

262、 likely to see the French economy avoid a recession this year.The composite PMI for February showed that France returned to growth for the first time since October,while the latest survey from the National Institute of Statistics and Economic Studies(INSEE)points to strong sentiment among firms(see

263、Chart 28).Business sentiment has been bolstered by the recent fall in wholesale energy prices,the easing of supply chain disruptions,and the betterthanexpected externalenvironment.The nearterm outlook remains clouded by external risks,ongoing inflationary pressures,and diminishing government support

264、.In addition,the impact of rising interest rates is set to gradually pass through to the economy.These will weigh on households purchasing power and domestic activity.Overall,we expect the economy to grow by 0.4%this year,before picking up to 1.1%in 2024.Chart 29:French inflation set to peak lower b

265、ut later than in the EurozoneSource:Eurostat,KPMG forecast.Annual HICP inlfation,%25%10%15%20%5%0%-5%20242002020223FranceEurozone,excluding FranceThe path for inflation continues to be influenced by the timing of the governments energy support,which caused France to be an outli

266、er in its inflation path last year compared to other European economies(see Chart 29).While this reduced the full impact of higher prices last year,the end of the fuel rebate and the increase in regulated electricity and gas prices(capped at 15%)in January 2023 have meant that inflation will likely

267、peak later in France compared to its peers.Annual HICP inflation picked up in February to 7.3%(the highest rate since the adoption of the euro in 1999),with core inflation at 4.6%.Supermarkets are expected to hike prices amid a deadlock in negotiations with producers,with food prices likely to remai

268、n elevated throughout 2023.We expect HICP inflation to average 6.4%in 2023,before moderating to 2.4%in 2024.The French labor market remains tight.The unemployment rate sits at 7.1%,which is below the prepandemic levels of 89%.Reflecting that,wage growth accelerated to 3.8%in Q3 2022,the highest rate

269、 outside of the pandemic since 2001.The positive sentiment around the labor market is corroborated by the INSEEs employment climate indicator,which remains significantly above its longterm average.We expect unemployment to remain steady at 7.3%in 2023,before gradually picking up as demand slows and

270、hiring returns to more moderate levels.Moustafa AliEconomist,KPMG in the UKMichal StelmachSenior Economist,KPMG in the UKGlobal Economic Outlook March 202332 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.Italy:Cautious optimism as outlook brightensDespite weaker growth,Italy,on the back of stronger than expected sentiment,looks likely to narrowly escape a technical recession in the first half of the year.Strong growth in investment will be supported by the governments Resilience and Recovery

272、 Plan.Large public sector debt burden may pose a risk if the ECB tightens monetary policy further.As the sharp increase in food and energy prices eroded the value of household incomes,the Italian economy markedly slowed at the end of 2022.GDP fell by 0.1%in Q4 2022,driven by a decrease in consumptio

273、n which fell by 1.6%.Italy was severely exposed to the energy crisis last year in large part due to its reliance on Russian gas,which accounted for 40%of total gas imports at the start of 2022.However,this number fell to just 10%by the end of the year as Italy increased imports from other sources.Th

274、ere have been encouraging signs in business surveys since the start of the year.The composite Purchasing Managers Index(PMI)for Italy stood at 52.2 in February,up from 51.2 in January and its highest level since June 2022.The PMIs for February showed continued growth in the manufacturing and service

275、s sectors,suggesting a broadbased recovery across most sectors of the economy in Q1 2023.Consumer and business sentiment have also improved since the start of the year,with the latest survey from the Italian Institute of National Statistics showing both at their highest levels since October 2022.Bus

276、iness sentiment has also in part been bolstered by the Italian governments Resilience and Recovery Plan(RPP)worth EUR210 billion.The RPP,which was announced in 2021,will be financed by EU Next Generation funds and will run until 2026.Under this plan,the Italian government will invest across a range

277、of sectors,including energy and infrastructure.This spending package is expected to drive growth in investment and the economy over the comingyears.With European energy prices and supply chain pressures easing since the start of the year,the Italian economy is now looking likely to escape a technica

278、l recession in Q1 2023.Despite this,the overall outlook for the year is set to be dampened by elevated consumer prices which will continue to squeeze household incomes and weaken consumption throughout 2023.We expect the Italian economy to grow by 0.5%this year,followed by growth of 0.9%in 2024(see

279、Chart30).Table 12:KPMG forecasts for Italy 202220232024GDP3.80.50.9Inflation8.77.71.4Unemployment rate8.18.28.7Source:Istat,Eurostat,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the HICP.Chart 30:Outl

280、ook for the Italian economySource:Istituto Nazionale di Statistica,KPMG analysis.Contributions to annual GDP growth,percentage points1084620-2-4-10-8-6GDPConsumptionGovernmentInvestmentNet tradeOther(inc.stocks)Forecast20002320242022Global Economic Outlook March 202333 2023 Cop

281、yright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Chart 31:Outlook for Italian inflationSource:Eurostat,KPMG forecast.ForecastAnnual HICP inlfation14%4%6%8%8%10%2%0%-2%202420252002020223

282、As energy prices continue to fall back from their winter peak,the Italian economy is starting to see a deceleration in headline inflation.The latest data from Istat showed that annual inflation in domestic energy prices fell from 42.5%in January to 28.2%in February,while headline inflation slowed fr

283、om 10.7%to 9.8%over that period.Despite the welcome fall in overall inflation,core inflation accelerated in February,suggesting that inflation may remain sticky this year.Services inflation also increased,to 4.4%in February,compared to 4%in January.Overall,we expect inflation to average 7.7%this yea

284、r and 1.4%in 2024(see Chart 31).Higher ECB rates could challenge the sustainability of Italys stock of public sector debt.Italy has a significant debt burden,the latest quarterly data from Eurostat show that the debttoGDP ratio stood at 147%in Q3 2022,the second largest in the Eurozone after Greece

285、and significantly above the Eurozone average of 93%.Higher than expected Eurozone inflation since the start of the year has already raised market expectations for the ECBs terminal rate.As shown in Chart 32,the spread between Italian and German government yields has remained steady.However,continued

286、 increases in base rates could push up the cost of borrowing for Italy.While a debt crisis is unlikely,if Italian borrowing costs diverge sharply from Germany,it could potentially lead to the government being forced to tighten its fiscal stance.Chart 32:German and Italian bond yields have both risen

287、 in tandem since last yearSource:Refinitiv Datastream.10-year government bond yield7%2%3%5%6%4%1%0%-1%200016ItalyGermanyThe Italian labor market remains resilient despite the weakening in the economy,with the latest figures from Eurostat showing unemployment stable at 7.9%,whil

288、e wages grew by 2.2%according to Istat.We expect the labor market to weaken as a result of the slowdown in economic activity this year,with unemployment forecast to rise to 8.2%on average in 2023 and 8.7%in 2024.Despite the risks to the outlook,there are reasons to remain cautiously optimistic on th

289、e Italian economy.Improving global conditions coupled with continued support through the RPP will likely stave off recession this year.As energy prices continue to decline,Italy may see a quicker fall in inflation this year compared to its Eurozone peers.Natural gas accounts for over 40%of Italys en

290、ergy mix,significantly higher than the Eurozone average.The fall in global gas prices will provide relief for households and businesses.A pickup in Eurozone growth and the expected end of the ECBs hiking cycle will boost economic activity in2024.Moustafa AliEconomist,KPMG in the UKGlobal Economic Ou

291、tlook March 202334 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Netherlands:Economy to remain resilient as fiscal deficit widensHousehold support from government weights on the fiscal positio

292、n.Government expenditure to be the key driver of growth in 2023.Core inflation to remain high in 2023 as inflationary pressures broaden.The Dutch economy avoided a recession with growth of 0.6%in Q4 2022(after a contraction of 0.2%in the previous quarter).Despite the slowdown in the second half of t

293、he year,the economy registered robust growth of 4.5%in 2022.Higher than expected net trade and strong household consumption,driven by a tight labor market and government support to fight the energy crisis,contributed to this positive outcome.We forecast Dutch GDP to grow at 0.5%in 2023 and 1.3%in 20

294、24,remaining below its average historical growth.The balance of risks remains tilted to the downside,but adverse risks have moderated as there are signs that inflationary pressure is already abating.Household consumption has remained resilient and could provide a positive surprise in 2023 as consume

295、r confidence continues to slowly recover.Despite the weak growth outlook,we expect the unemployment rate to stay close to 4%in 20232024,given the extreme structural tightness in the labor market makes employers reluctant to lay off workers.We expect elevated inflation,lagged impacts of monetary poli

296、cy tightening and a slowdown on international trade to weigh on private sector growth.Government expenditure will be the key driver of GDP growth in 2023,reflecting the coalition governments sizeable packages to support households with the energy crisis as well as its ambitions to fight climate chan

297、ge.Table 13:KPMG forecasts for the Netherlands 202220232024GDP4.50.51.3Inflation10.05.23.0Unemployment rate3.53.84.0Source:Eurostat,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation rate measure is the CPI.Chart 33:Econom

298、ic growth by demand componentsSource:Statistics Netherlands,KPMG analysis.Contributions to annual GDP growth,%15.0%10.0%5.0%0%-5.0%-10.0%GDP growthConsumptionGovernmentChange in inventoriesInvestmentNet tradeQ1Q2Q3Q4Q1Q2Q4Q1Q2Q3Q3Q4Q1Q2Q4Q320020Global Economic Outlook March 202335 2023 Co

299、pyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Annual CPI inflation peaked in September 2022(14.5%)and has come down to 8%in February 2023,but we forecast inflation to remain high in 2023 at an annual ave

300、rage of 5.2%.The effects of higher inflation in 2022 will continue this year as higher costs of transportation,raw materials and energy are passed on to consumers.The contribution of energy prices to headline inflation will keep on decreasing,but higher labor costs and input prices will keep core in

301、flation high.The latter implies the inflationary sources have broadened and high core inflation would be more persistent than previously expected.The key risk is tilted to the upside and linked to potential further increases in wages driven by lack of supply and sectoral shifts since the pandemic.Re

302、garding household support,the government withdrew some measures at the end of 2022(e.g.lower energy tax and VAT rate on energy,remaining Covid19 measures),but an energy price cap was introduced in early 2023 and is expected to cushion the overall impact onconsumers.Chart 34:Dutch government debt and

303、 fiscal deficitSource:Statistics Netherlands,DNB,KPMG analysis.Note:2022 values are DNBs estimates.20202022Debt ratio,%GDPFiscal deficit,%GDP80%50%40%60%70%30%20%10%0%2002200820062004200182016Fiscal deficit(RHS)Debt ratio(LHS)-6.0%-5.0%-4.0%-3.0%-2.0%-1.0%0%1.0%2.0%3.0%50.2-1.0Government

304、support measures are adding pressure to fiscal balances,and we expect the fiscal deficit to remain weaker in the next few years.According to government sources,purchasing power measures in the 2023 budget are worth EUR15 billion,including structural measures such as increasing the minimum wage by 10

305、%and its corresponding knockon effects on pension and welfare benefits payments.Additionally,the government introduced an energy price cap and subsidy scheme for energyintensive SMEs;the cost of these packages will be dependent on future market prices and the Dutch National Bank(DNB)estimates it at

306、EUR11 billion.The government deficit would peak at around 3.5%in 2023 and fall gradually,remaining near 2%over the following few years.This reflects the governments sizeable mediumterm investment plans including the climate and transition fund(EUR35 billion by 2035),nitrogen fund(EUR24 billion by 20

307、35)and enhancement of the Dutch education system(EUR2.8 billion).The debt to GDP ratio is expected to fall below 50%in 20232024(from 52.4%in 2021,and near 50%in 2022)as a consequence of higher nominal GDP(mainly driven by the price component).Diego Vilchez NeiraSenior Manager,KPMG in the Netherlands

308、Global Economic Outlook March 202336 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Ireland:Continued growth,comes with caveatsEconomy strong throughout winter across all key macroeconomic indicato

309、rs.Budgetary surplus facilitated wide range of social transfers to mitigate costofliving challenges.Infrastructure bottlenecks increasingly seen as hampering growth and competitiveness.The Irish economy entered winter 2023 with a degree of momentum,in spite of the range of challenges facing the wide

310、r European and global economies.Over the course of 2022,the economy as measured by GDP grew by 12.2%,while the domestic economy,based on an alternative measure called Modified Domestic Demand(MDD),grew by 8.2%.These rates made the Irish economy the fastest growing economy in Europe in 2022.The stron

311、g end to 2022 was driven by higher levels of investment by multinationals in intellectual property,continued robust growth in exports of both goods and services,higher private consumption(despite downbeat consumer sentiment),and a relatively mild winter.But despite this broadly positive situation,a

312、number of uncertainties remain:the global outlook(modity markets and China),tighter ECB monetary policy,and a range of incountry dynamics between profits,margins,prices and wages.Given some clear anomalies in Irelands reported economic growth figures,it is difficult to identify the strength or robus

313、tness of the underlying economy.Many households and businesses may claim that they do not feel the economy growing by 8%12%.Inflationary pressures have been eroding disposable incomes for many on lower incomes and a range of bottlenecks in infrastructure and services do not tally directly with the r

314、eported headline strength of the economy.Meanwhile,exceptional levels of tax receipts in 2022 facilitated a budgetary surplus,allowing the government to provide significant levels of social transfers to cushion households against more severe impacts to their disposable incomes.Table 14:KPMG forecast

315、s for Ireland 202220232024GDP12.25.04.0Inflation8.15.03.5Unemployment rate4.54.54.5Source: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.Global Economic Outlook March 202337

316、 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Inflation since the start of 2023 has been somewhat more persistent than had been anticipated.The headline rate stood at 8.1%in February,up from 7.5%

317、in January.Effectively,while there has been a fall in the cost of heat and power,inflation rates in other sectors remain high.However,as 2023 evolves,we expect inflation to fall,potentially to 5%,on the back of falling energy prices.Consistent with that,recent sentiment indices suggest that consumer

318、s and businesses are becoming more optimistic through 2023,implying that the worst of consumers concerns may be behind them.Yet,while inflation may fall,the expected further monetary policy tightening from the ECB would cause issues for homeowners in Ireland,who will see mortgage and loan repayments

319、 increase and may act as a drag on overallgrowth.On a wider level,another drag on potential growth may be a general retreat from globalization.However,rather than a retreat in 2022,multinationals in fact increased total employment numbers in Ireland by 9%,doubling down on the investments they have m

320、ade in the country.In the Tech sector,on which Ireland relies for exports,jobs,and tax revenue,negative impacts of the recent slowdown have been modest.The sector in Ireland has remained relatively resilient,with total layoffs to date accounting for around 1%of the sectors workforce in Ireland,compa

321、red to around 1.5%2%in the sectors global workforce.Similarly,some commentators and regulatory bodies fear that the Irish Exchequer is overreliant on tax paid by multinationals.As a way to create a buffer against this risk,the government has been transferring several billion euros from its October b

322、udgetary surplus to a rainy day reserve fund.While the government hopes that any feared risks never materialize,its overall approach has been prudent to date.At the same time,many representative groups have been encouraging the government to provide further social transfers now,rather than to withho

323、ld the spend for another point in the future.On the whole,the outlook for Ireland remains positive in 2023 and beyond.Despite the improved outlook for inflation,high prices and rising interest rates are still expected to drag on growth,with GDP and MDD expected to respectively grow by 5%and 3%in 202

324、3 and by 4%and 3%in 2024.Unemployment is expected to remain low and labor shortages in certain sectors may in fact hold backgrowth.Taking account of these various dynamics,there is a degree of relief amongst Irish policymakers that many of the prewinter economic downside risks did not materialize.In

325、 some cases,the feeling may be delight that some outturns have been as positive as they have been.Against the global backdrop of multiple negative risks,it would seem appropriate that the Irish approach is to prepare for a rainyday.Dr.Daragh Mc GrealDirector,Strategic Economics,KPMG in IrelandGlobal

326、 Economic Outlook March 202338 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.UK:Short-term momentum masks underlying headwindsAlthough the likelihood of a recession has fallen,growth is expected t

327、o be negative in 2023 on the back of a squeeze on household real incomes and the impact of past interest rate increases.The outlook for businesses remains mixed,with government measures aiming to boost investment likely to only have a temporary effect on growth.Structural issues,including skills sho

328、rtages,slowing workforce participation,and population ageing,dominate the longerterm risks to the outlook.The UK economy at the end of 2022 has proved to be more resilient than expected.GDP was flat on the quarter,therefore avoiding a technical recession following the fall in Q3 2022,although these

329、data are still provisional.A widespread industrial action during winter has led to 1.7 million working days lost,distorting the headline growth figures.We estimate that while the impact of strikes subtracted around 0.1 percentage point from underlying growth in Q4 2022,it would subsequently boost gr

330、owth in the following quarter as the disruption unwinds and the impact on the volume of activity fades.More timely indicators have been positive on balance.The composite PMI for February picked back above the 50.0 threshold for the first time since July 2022.Business confidence,measured by the Lloyd

331、s Business Barometer,is close to its prepandemic average,while consumer confidence has risen,albeit from a historically low level.The latest official data for January showed GDP growing by 0.3%on the previous month,of which we estimate that around a half was thanks to a fall in the number of days lo

332、st to industrial action.Table 15:KPMG forecasts for the UK 202220232024GDP4.00.30.6Inflation9.16.31.8Unemployment rate3.74.14.6Source:ONS,KPMG forecasts.Note:Average%change on previous calendar year except for unemployment rate,which is average annual rate.Inflation measure used is the CPI and the u

333、nemployment measure is LFS.Global Economic Outlook March 202339 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Although the likelihood of a UK recession has fallen,it has not dissipated entirely.We expect a major headwind to come via household consumption,with a fall of 0.4%in 2023.Elevated infla