NEW DELHI: Global growth is expected to face a potential slowdown in 2024, following a year of better-than-expected performance in 2023, the Reserve Bank of India (RBI) said on Monday in its monthly bulletin. The report also flagged the high crude oil price (above $90 a barrel) as a potential risk to global financial stability.
The report pointed out that the possibility of inflation persisting above target levels and higher neutral interest rates may force central banks to maintain disinflationary approaches well into 2024. “The upheavals over the past three years could bring about persistent price pressures that will be unpredictable and harder to root out. Hence tighter financial conditions may continue to prevail,” the central bank said.
The global economy could slowly be approaching an inflection point beyond which things will change to local growth booms but production inefficiencies worldwide. This has led to a view that there will be a recession; it is just getting pushed into 2024, it added.
According to the Reserve Bank of India, a new risk to global financial stability stems from the commodity markets as crude oil prices ruling above $ 90 per barrel challenge 10-month highs due to Saudi Arabia and Russia extending voluntary production cuts to the end of 2023. “The strength of the United States’ dollar on safe-haven demand is also making crude oil prices higher. Global inflation is once again under siege as the deep deficits in global oil balances become persistent unless global demand is hit by a sharp economic downturn,” the report added.
The apex bank said key domestic economic indicators indicate an increase in quarter-on-quarter (QoQ) momentum in gross domestic product (GDP) growth in the second quarter of the financial year 2023-24, primarily fueled by domestic demand.
Clothing and lifestyle retailers, as well as shopping malls, have witnessed a remarkable recovery in sales across various price points in recent weeks, said the central bank, adding that the surge has raised hopes for increased demand throughout the festival season, which commenced with Raksha Bandhan and Onam, boosting prospects for discretionary retail spending.
The electronics and automobiles sectors are expected to be the next segments to attract festival-related spending. “There are also indications that rural demand for the fast-moving consumer goods (FMCG) has swung back into positive territory after being under pressure for a year,” the report stated.
RBI sees GDP rise in Q2
The Reserve Bank of India said that key domestic economic indicators indicate an increase in quarter-on-quarter (QoQ) momentum in GDP growth in the second quarter, primarily fueled by domestic demand