Herman van Papendorp, Head of Investment Research & Asset Allocation and Sanisha Packirisamy, Economist at Momentum Investments
Economies at a Glance by Momentum Investments’ macro research team consists of an easy-to-read chartbook of what is happening in the economy and a snapshot of the index returns for the month.
This month’s infographic features the history of BRICS summits, the contribution of the BRICS economies to world GDP, world population, land area and foreign direct investment. We also take a look at the opportunities for the BRICS bloc, challenges facing the BRICS nations and the countries which have formally and informally expressed an interest in joining the bloc for economic and political reasons.
United States
Despite the United States (US) Federal Reserve raising rates by 25 basis points in July to a range of 5.25% to 5.5%, the outlook for the economy improved in recent weeks due to the resilience of the labour market and ebbing inflation. Analysts surveyed by Bloomberg predict a 60% probability of a US recession in the next year, compared to a peak of 68% in January.
Eurozone
The centre-right Populist Party beat Prime Minister Pedro Sanchez’s Socialists in Spain’s snap general election in July. However, weeks of political maneuvering are likely to follow as the Populist Party needs support from multiple junior parties to achieve a governing majority of 176 seats.
United Kingdom
The relationship between the United Kingdom (UK) and the European Union (EU) after Brexit was initially often characterised by contentious disagreements. While certain areas, like addressing trade barriers from the post-Brexit deal, necessitate ongoing consultation with EU regulations, other economic and policy domains are witnessing closer cooperation.
Japan
Despite the United Arab Emirates (UAE) sharing longstanding bonds with India, Japan and Turkey, meetings with these countries served to strengthen partnerships even further in July. Japan’s prime minister, Fumio Kishida, and UAE president, Sheikh Mohamed bin Zayed, signed 23 agreements and memoranda of understanding, covering areas of energy, space, startups, artificial intelligence, transport, education and climate change.
China
A delayed but rapid reopening of the economy led surveyed analysts to raise their growth expectations for China for this year from 4.8% in January to 5.7% in May. Expectations have since been pared back to 5.4% on a disappointing second quarter growth figure of 6.3% (0.8% in quarterly terms), trade headwinds, weak consumption and an underperforming property sector.
Emerging Markets
Turkey’s new policymakers are faced with still-high inflation of 38%, which dropped from an even higher rate of 86% in September last year. Turkey’s central bank underdelivered relative to market expectations for a 500-basis point hike in July, by raising its key interest rate by 250 basis points to 17.5%. Although Turkey has strengthened trade and investment relations with the Gulf to boost growth prospects, macroeconomic stability remains at risk from high inflation and a weak currency.
South Africa
Following a total of 475 basis points of interest rate hikes since November 2021, the SA Reserve Bank(SARB) paused the repo rate at 8.25%, acknowledging the notable impact of past monetary policy tightening on the economy, which is expected to persist into the next year. The SARB foresees inflation dropping back to the midpoint in a sustainable manner by the third quarter of 2025 but remains vigilant about risks to inflation posed by network capacity constraints, uncertain food and energy prices and wages. Inflation forecasts were slightly reduced to 6% in 2023, 5% in 2024 and remained steady at 4.5% for 2025.
ENDS
