Country Posted Very Solid Growth, Says Goldman Sachs
Global pundits hail Indian economy, in a better position to deal with global headwinds than many other countries, PM Modi points out.
MUMBAI, Jan 14 (The CONNECT) – Goldman Sachs expects the core inflation to remain uncomfortably high in India through at least the first half of 2023.
While headline CPI inflation has eased somewhat in recent months, core ex-petrol/diesel/gold/silver has been grinding higher since early in the pandemic, the global investment banking, securities and investment management firm says.
Core services inflation appears likely to remain resilient. Recent PMI data also suggest that economic momentum is holding up well, with the December manufacturing and services surveys both improving to near decade highs, which should keep pressure on from the demand side. Given that regional rate hikes have been highly correlated with inflation overshoots, the firm continues to forecast a slightly higher terminal rate for the RBI (6.75%) than consensus.
Goldman Sachs says ASEAN economies were the notable outperformers in the region in 2022, with India also posting very solid growth.
“Inflation is peaking, in our view, though it will remain high in many economies (particularly smaller open economies) through mid-2023. Strong growth and resilient core inflation in India could push the central bank to tighten more than markets expect in H1,” the firm says.
The analysis, coming as it does in the wake of IMF and other global analysts the Goldman Sachs report reaffirms the global positive outlook for the Indian economy.
- Please also read: Strong democracy, young demography, political stability make India global investors’ paradise, says PM Narendra Modi
Recently, Prime Minister Narendra Modi highlighted that the IMF which sees India as a bright spot in the global economy, and the World Bank which has expressed earlier that India is in a better position to deal with global headwinds than many other countries.
Modi credited India’s strong macroeconomic fundamentals and mentioned OECD which claimed that India will be among the fastest-growing economies in the G-20 group this year.
Quoting Morgan Stanley, Modi said that India is moving towards becoming the world’s third-largest economy in the next 4-5 years. The CEO of McKinsey has declared that not just the present decade but the century itself belongs to India.
Meanwhile, Goldman Sachs said about China that the country’s abrupt U-turn on Covid policy has led to a large wave of infections in recent weeks and a drop in mobility and economic activity. “We retain a below-consensus forecast of -4% annualized for Q4 GDP growth (and +2.6% for full-year 2022). Looking forward, though, it appears the peak in daily cases is already past, based on news reports as well as related information such as Internet search frequency for virus-related topics, and there is evidence that mobility is beginning to recover,” it says.
“China’s abrupt shift on Covid policy has led to a large wave of infections in recent weeks and a drop in mobility and economic activity,” Andrew Tilton, Goldman Sachs’ chief Asia Pacific economist, wrote in a recent report. However, “reopening should result in a burst of growth over the coming year and benefit regional economies, with Hong Kong and Thailand likely to see significant boosts from mainland tourists,” he says.
