Dear clients,
Ratings agency Moody’s on Friday raised its forecast for U.S. economic growth in 2023 but lowered its outlook for China next year, noting that while the risk of a U.S. recession has declined, China’s problems are mounting.
„We have raised our forecast for U.S. economic growth to 1.9% in 2023 from 1.1% in our May forecast, recognising the strong underlying economic momentum,“ Moody’s said in a report.
The agency, which is currently the only Big Three agency still holding a „AAA“ rating for the U.S. after a downgrade by Fitch last month, maintained its 2024 economic growth forecast at 1%, saying high interest rates will drag on the economy.
„We believe it will be difficult for the Fed to achieve a sustained decline in inflation to the 2.0% target while current economic conditions persist,“ Moody’s said in a statement. „In our view, several quarters of below-trend growth are needed to prevent overheating.“
On the other hand, the agency said China faces „significant growth challenges“ stemming from weak business and consumer confidence amid economic and political uncertainty, ongoing problems in the real estate sector and an aging working-age population.
Moody’s maintained its growth forecast for this year at 5%, but cut its 2024 outlook to 4.0% from 4.5% previously. China’s rating is at A1 with a stable outlook, four notches below the U.S.‘ top rating.
„Data from China suggest that the economic recovery from the prolonged zero-rate policy remains muted, as the momentum for renewed growth seen in March, April and May appears to be waning,“ Moody’s said in the report.
„We believe low consumer confidence is restraining household spending, and economic and political uncertainty will continue to weigh on business decisions.“
