Recovery expected in second half of 2023: Oxford Economics

There has been further confirmation that following further economic slow down in the first half of 2023, there is likely to be some improvement in the latter half of the year and into 2024.

Riccardo Marcelli Fabiani, an economist with Oxford Economics, said that there will be further slowing down in 2023 due to a combination of monetary policy and high inflation affecting household incomes and thus reducing consumption. There are also elements of catching up following the pandemic.

But although we can expect a weak Q1 and Q2, a gradual recovery will follow, Fabiani says. Sticky inflation and positive growth surprises will lead the European Central bank to raise rates in March he states. That will spill over into government bond yields, and then interest rates in the real economy, faced by households and businesses.

“Of course, this will take its toll on growth, especially for investments,” Fabiani told Real Asset Insight’s Richard Betts.

But a gradual recovery is expected towards the end of the year because economies have already adapted to the new regime of high energy prices and reduced gas supply. “Of course, there is a lot of uncertainty around all of these because it all depends on geopolitical events, so they are very difficult to predict.”

“We think that interest rates would go up in the short-term, this will diminish returns, especially as policy rates stay constant, and then will start going down over 2024.”

Please click on the video above to watch the full interview or listen to the podcast below.