Baseline Macroeconomic Scenarios for Rated Sovereigns: September 2023 Update

This commentary provides an update to DBRS Morningstar's Baseline Macroeconomic Scenarios. These baseline scenarios provide our estimate of the current market consensus, and are drawn from the median forecast of various external contributors.

Key Highlights
• Global growth has held up better than expected in 2023. Unemployment remains low across the major economies.
• Due to declining real incomes and the cumulative effects of central bank tightening, the outlook for 2024 is poor. Nonetheless, core inflation is slowing and central banks are waiting for additional data before tightening any further. Some emerging markets are already beginning to ease.
• Near term risks remain tilted toward the downside, due to financial conditions as well as geopolitical risks and vulnerabilities in commercial real estate markets.

“Although household balance sheets appear to be in strong condition in most advanced economies, an increasing number of households are grappling with declining real incomes and rising debt payments,” notes Tom Torgerson, Co-Head of Sovereign Ratings for DBRS Morningstar. “Meanwhile, still elevated inflation may make it difficult for some central banks to respond to shocks that negatively affect demand.”