(Reuters) -Citigroup raised its 2023 global economic growth forecast to 2.4%, citing “solid” performance in the United States, euro area and China, and also pushed out its expectation for a U.S. recession to the fourth quarter of the year.
Citi economists had earlier pegged global growth at 2.2% for the year and expected the onset of a recession in the United States in the third quarter.
“Our outlook envisions that the acute financial stresses, which last month triggered pressures on both sides of the Atlantic, will continue to recede,” Citi economists led by Nathan Sheets said in a note.
Sheets was referring to the collapse of two mid-sized U.S. banks last month and a forced takeover of Swiss lender Credit Suisse by UBS, sparking worries about broader stress in the banking system that is widely seen as being brought about by global central banks’ aggressive rate hikes to battle inflation.
Citi however, cuts its global economic growth forecast for next year to 2.1%, from the 2.5% expected previously.
“While the acute phase of the banking tensions appears to be abating, we continue to see chronic challenges associated with higher interest rates and, more broadly, the implications of this episode for bank assets, deposits and funding, and bank margins,” said Sheets.
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These conditions could lead to a tightening of credit conditions, including the possibility of a “credit crunch”, he said.
(Reporting by Susan Mathew in Bengaluru; Editing by Savio D’Souza)