- Goldman Sachs lowered its forecast for 2023 GDP growth to 1.2%, down from 1.5%.
- The firm expects small- and medium-sized banks to pull back on lending as they aim to preserve liquidity.
- It remains difficult to predict the overall macroeconomic impact of this slowdown in lending.
The recent turmoil in the banking sector following the collapse of Silicon Valley Bank and Signature Bank led Goldman Sachs to lower its outlook for U.S. economic growth this year.
Goldman Sachs wrote in a note to clients that it has reduced its forecast for 2023 gross domestic product (GDP) to a gain of 1.2% from the previous 1.5%. Economists at the bank indicated the reason for the change was that they anticipate a pullback in lending by small- and medium-sized banks as they try to preserve liquidity in case they need to cover withdrawals. That would mean much tighter lending standards, which could be a drag on GDP expansion already affected by tightening in recent quarters.
Goldman said that small- and medium-sized banks play an important role in the economy, noting that banks with less than $250 billion in assets make up about half of U.S. commercial and industrial lending, 60% of residential real estate lending, 80% of commercial real estate lending, and 45% of consumer lending.
The economists explained that "the macroeconomic impact of a pullback in lending will remain highly uncertain until the extent of the stress on the banking system becomes clear."
They added that following the failures of Silicon Valley Bank and Signature Bank, U.S. policymakers have taken aggressive steps to shore up the financial system, "but concerns about stress at some banks persist."