WASHINGTON–CUNA’s economists, including Senior Economist Dawit Kebede, have released an updated macroeconomic and credit union forecast for 2023 as part of the May 2023 CUNA Economic Update.
Among the highlights of the forecast:
- Economic growth: CUNA’s economists are forecasting the economy will increase by 1% this year and 1.5% next year.
- Inflation: The report notes inflation is slowing down but remains elevated above the Federal Reserve’s target.
- Labor market: The report further notes labor demand is still strong but declining compared to previous months.
“After the failure of some banks, it’s not only demand for loans that is going to be impacted, but supply of credit is also going to be tight,” said Kebede. “Standards are tightening and demand is also falling for commercial, industrial and household loans.”
The Forecast
In addition, the economists are forecasting:
- Savings growth is expected to grow 4% this year and 5% next year.
- Loan growth will slow down relative to last year, but will remain close to the long-run growth trend.
- Liquidity will tighten further in 2023 with the loan-to-savings ratio rising by another 2.8 percentage points to 84.3% by year-end.
“We are forecasting inflation would continue to slow down and probably reach 3.5% by the end of the year. Still, above the Fed’s target of 2%, but maybe next year it will come down to where the Federal Reserve wants it to be,” said Kebede. “In the process, the unemployment rate would trend up a little bit to 4% and that's also consistent with prices coming down … That’s our forecast for year-end. No other further increases coming this year and probably when inflation starts to go down next year rates will start to go down.”
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