Economy US may skirt recession in 2023 but Europe not so lucky By Reuters November 14, 2022 NurPhoto/Ying Tang Morgan Stanley predicted the Federal Reserve to keep rates high in 2023 US core inflation to fall to 2.9% at end-2023Asia growth to dip to 3.4% in H1 2023 but reach 4.6% in H2 2023Cross-asset returns will look much better in 2023 than in 2022 Britain and the euro zone economies are likely to tip into recession next year, Morgan Stanley said, but the US might make a narrow escape thanks to a resilient job market. At the same time, China’s expected reopening after almost three years of coronavirus curbs is set to lead a recovery in its own economy and other emerging Asian markets, the investment bank’s analysts said in a series of reports published on Sunday. “Risks are to the downside,” the reports said, projecting the global economy to grow by 2.2 percent next year, lower than the International Monetary Fund’s (IMF) latest 2.7 percent growth estimate. Next year, Morgan Stanley predicts a sharp split between developed economies ‘in or near recession’ while emerging economies ‘recover modestly’ but said an overall global pickup would likely remain elusive. China’s economy was predicted to grow five percent in 2023, outpacing the average 3.7 percent growth expected for emerging markets, while the average growth in the Group of 10 developed countries was forecast at just 0.3 percent. Central banks across the globe have raised interest rates this year to curb raging inflation, and in the US, Morgan Stanley predicted the Federal Reserve to keep rates high in 2023 as inflation remains strong after peaking in the fourth quarter of this year. “The US economy just skirts recession in 2023, but the landing doesn’t feel so soft as job growth slows meaningfully and the unemployment rate continues to rise,” the report said, predicting a 0.5 percent expansion next year. “The cumulative effect of tight policy in 2023 spills over into 2024, resulting in two very weak years,” the report added. Globally too, the peak in inflation should come in the current quarter, the analysts said, “with disinflation driving the narrative next year”.