While cutting its estimate for China for next year, credit rating agency Moody’s boosted its forecast for U.S. economic growth in 2023 on Friday. It stated that while the chance of a recession had decreased in the United States, China’s issues were growing.
According to a report from Moody’s, “We have increased our growth forecast for the US economy from 1.1% in our May outlook to 1.9% in 2023, acknowledging the strong underlying economic momentum.”
Following Fitch’s downgrading last month, the companyβnow the only one of the “big three” to give the United States a top-tier triple A ratingβkept its 2024 growth projection at 1%, arguing that high interest rates would serve as an economic brake.
If the current economic circumstances continue, “we believe that it will be difficult for the Fed to achieve a sustained fall in inflation to its 2.0% target,” Moody’s warned.
In our opinion, a few quarters of below-trend growth are necessary to avert overheating.
On the other hand, it claimed that China was dealing with “considerable growth challenges” brought on by low corporate and consumer confidence amid ambiguous economic and political conditions, persistent problems in the real estate industry, and an ageing labour force.
Moody’s maintained its 5% growth forecast for this year but decreased its outlook for 2024 from 4.5% to 4.0%. It gives China an A1 rating with a stable outlook, four notches below the highest Aaa rating given to the United States.
“Data from China suggest that the economic recovery from a prolonged zero-COVID policy remains muted, as the reopening momentum seen in March, April, and May appears to be waning,” Moody’s stated in its research.
“We think that low consumer confidence is preventing households from spending more, and that economic and policy uncertainty will continue to influence corporate decisions.”
