The S&P 2024 Capital Markets Outlook paints a rather depressing picture for global equity issuance. What needs to happen for this to turn around?
Interest rate hikes and the outlook for rates have really influenced all activity in capital markets. Equity issuance is no different. Higher rates impacted equity issuance activity across the board in 2022, and activity remained low in 2023. The aggregate amount of global equity issued has come in below $101 billion in each of the last eight quarters through the end of the third quarter of 2023. That is less than half of what was issued in each quarter of 2021.

The deteriorating growth outlook for the eurozone and the faltering recovery in mainland China are getting people concerned about 2024. Are there any bright spots that we can look forward to?
Our forecast for the eurozone – ahead of consensus – remains for mild recessionary conditions to continue in early 2024. Annual growth is forecast at around 0.5 percent only for 2024. Positives include the moderation in underlying inflation. This will support household real incomes and consumer spending, and the expectation of rate cuts from mid-year. We estimate that the ECB has likely reached the end of its tightening cycle. And we expect the start of the loosening cycle during the second quarter of 2024. Unemployment has also remained unusually low despite the economic downturn. We expect a gradual pick-up in quarter over quarter rates of real GDP growth over the course of this year.

Looking at the Middle East, geopolitical tensions have obviously had an impact on economic growth. Do you see light at the end of the tunnel? What’s your take on continued crude production cuts?
S&P Global Market Intelligence’s baseline scenario from mid-December has the MENA region growing by 2.3 percent in 2024 and 2.7 percent in 2025 after a more subdued 1.5 percent in 2023. This amid expectations of continued non-oil and gas economic activity growth and a less troubled geopolitical backdrop. Our analysts found that private sector growth in the Gulf Cooperation Council countries could benefit from an anticipated easing of monetary policy terms in the U.S. in 2024. The oil sector of GCC economies is stagnating as we anticipate production cuts to be maintained throughout 2024 (even in 2025). This is due to soft global oil demand growth and strong non-OPEC supply. The ongoing Israel-Hamas war will likely have a limited economic impact on the broader MENA region. Egypt, Jordan and Lebanon, bordering Israel and the Palestinian territories, will feel the pinch of the war through more adverse sentiment and reduced hospitality, trade and investment flows. Egypt has suffered from temporarily reduced gas flows out of Israel. This has hindered its ability to re-export it and generate much-needed hard currency. It is also adversely impacted by reduced Suez Canal revenues following shipping majors’ decision to re-route container vessels away from the Red Sea due to increased risks of attack. The war has compounded Egypt’s foreign liquidity issues. However, we expect Gulf monarchy support and an IMF deal to hold and help meet Egypt’s significant external financing needs.

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