India’s economy to outperform, G20 growth to moderate: Moody’s

NEW DELHI: Moody’s expects global G20 growth to moderate in 2024 to 2.1 per cent from 2.8 per cent in 2023 and accelerate in 2025 to 2.6 per cent, the firm said in its Global Macroeconomic Outlook 2024-25 report.

Economic strength across emerging market countries varies considerably, with some like India, Brazil, Mexico and Indonesia outperforming expectations, while outlooks for Turkey and Argentina are highly uncertain, the report states.

The report states that India’s sustained domestic demand growth is propelling the country’s economy.

Robust goods and services tax collections, surging auto sales, rising consumer optimism and double-digit credit growth suggest urban consumption demand will likely remain resilient amid the ongoing festive season.

At the same time rural demand, which has shown nascent signs of improvement, remains vulnerable to uneven monsoons that could lower crop yields and farm income, the report states.

Expanding manufacturing and services PMIs and healthy core industries’ output growth add to evidence of solid economic momentum, it added.

With exports remaining weak amid an unfavorable global economic backdrop, strong domestic demand will likely to sustain growth in the near-term, according to the report.

“We forecast real economic activity in advanced G20 economies to decelerate from an estimated 1.7 per cent in 2023 to just 1.0 per cent in 2024 and recover to 1.8 per cent in 2025,” said Madhavi Bokil, Senior Vice President, CSR, at Moody’s Investors Service.

“Growth in G20 emerging markets will slow from 4.4 per cent in 2023 to 3.7 per cent in 2024 and 3.8 per cent in 2025. Excluding China, G20 EM growth will decelerate to 3.3 per cent in 2024 from an estimated 3.5 per cent in 2023 before accelerating to 3.5 per cent in 2025.

"Synchronous growth slowdown is expected in 2024 owing to the ongoing tightening in monetary and financial conditions in advanced economies," Bokil added.

“Household savings buffers, generally better private sector balance sheets, rotation to services from goods, relatively easier financial conditions, and slow transmission of tight monetary conditions has supported economic activity so far,” she said.

“These sources of strength will not buoy growth for too long - financial conditions have tightened even more in the last two months, which will further continue to dampen spending and investment.”

Highlights for the report include:

US – Growth forecasts tweaked very slightly, the economy is adding jobs at a rapid pace, but the labour market is nevertheless coming into better balance, consumers are becoming more price sensitive.

Euro area economies – our forecasts assume that economic activity will continue to decelerate as rising interest rates drag on economies

China – We will raise 2023 growth projection left at 5.0 per cent for 2023, followed by 4.0 per cent in 2024 and 2025. The 4 per cent growth forecast for 2024 envisions an acceleration in growth momentum

Other AEs and EMs - Very few changes from August. Downward revisions to forecasts for Canada, Australia and Korea acknowledge tight financial conditions are dampening economic momentum more than we previously estimated. The picture across other EMs is mixed, but there are some spots of resilience.

Energy prices will remain the key source of upside risk to inflation. We expect oil prices to remain volatile in the $80-$90 per barrel range over the next 3-6 months, and periodically overshoot $90 on account of increased geopolitical uncertainty in the Middle East.