Outlook 2024: Daleep Singh (PGIM Fixed Income)

Outlook 2024: Daleep Singh (PGIM Fixed Income)

21 december 2023

Outlook 2024
Daleep Singh

By Daleep Singh, Chief Global Economist at PGIM Fixed Income

 

What is the economic outlook for 2024?

‘The inflation picture in Europe appears more fraught than in the US, as the sharp rise in energy prices following Russia’s invasion of Ukraine continues to work its way through non-energy goods and services. Moreover, the prospect of continued energy volatility due to inelastic supply in the region will likely persist for years to come.

These worries have tilted ECB policy in favour of a higher-for-longer posture to avoid prolonged above-target inflation from becoming entrenched. The forceful transmission of tighter lending standards in a bank-centric financial system has resulted in an unpleasant mix of weak domestic demand against a backdrop of still elevated inflation. The European economy also faces mounting structural headwinds.

Its traditional growth engine of German exports appears to be fading and no longer represents a reliable source of growth, especially with the mounting uncertainty surrounding China’s economic picture.

As a result, we believe that the ECB may also have concluded their rate hiking cycles, particularly given the region’s lingering vulnerability to an energy shock. However, the ECB could still look to tighten policy by accelerating the pace at which securities purchased during the pandemic roll-off of its balance sheet. An acceleration poses the risk of further tightening credit conditions and weakening domestic demand for Italian government debt amidst the country’s unpalatable combination of higher deficits and slowing growth, possibly pushing the yields on Italian government debt wider relative to bond yields.’

 

The ECB could still look to tighten policy.

 

Gerelateerde berichten