Domestic house price growth in step with global outcomes.
The global housing market continues to soften following a strong rebound in 2021 and 2022, as the rising cost of debt and inflation bottleneck demand. While real house prices are declining in most countries, fundamentals differ between advanced and emerging economies.
Following the hawkish hold at the September 2023 Monetary Policy Committee (MPC) meeting, we have had a stream of more positive news that supports a steady rate view going into the November meeting. Global activity has weakened following the postpandemic cyclical recovery and, while inflation remains sticky, it is slowing. In line with this, central banks in advanced economies have also paused interest rate hiking cycles.
Following rapid monetary tightening to rein in decade-high inflation around the globe, tightening cycles have started to pause and focus is fast shifting to fiscal policy prudence. Unlike advanced economies which are somewhat insulated by safer-haven status, pressure is mounting for emerging markets to stabilise public debt. While a stronger dollar has raised external debt vulnerabilities, higher borrowing costs have lifted interest expenditure across the spectrum.
As was broadly expected, the 2023 Medium-Term Budget Policy Statement (MTBPS) demonstrated a deterioration in the fiscal framework due to poor revenue performance, amid reduced corporate profitability, and mounting expenditure pressures emanating from public sector wages and rapidly rising debt service costs. This resulted in a wider budget deficit, which threatens fiscal consolidation and the stabilisation of debt.
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