The international rating agency Fitch Ratings has downgraded its global economic growth forecast for 2022 to 2.4% from 2.9% expected in June.
“The European gas crisis, high inflation and a sharp acceleration in the pace of tightening of monetary policy in the world entail serious consequences for the economic outlook,” the updated Global Economic Outlook (GEO) said.
The global GDP growth forecast for 2023 has been lowered to 1.7% from 2.7%.
The eurozone and UK economies will fall into recession as early as this year, while the US will face a mild recession in mid-2023, Fitch predicts.
Eurozone GDP, according to the agency’s new forecast, will decrease by 0.1% in 2023 due to the consequences of the gas crisis (in June, an increase of 2.1% was expected).
The new forecast takes into account the complete or almost complete cessation of pipeline gas supplies from Russia to Europe. Fitch experts note that, despite the EU’s attempts to find alternative sources of supply, the supply of gas in the region will be significantly reduced in the near term, which will affect the industrial sector.
The growth forecast for the US economy for the current year has been worsened to 1.7% from 2.9%, for 2023 – to 0.5% from 1.5%.
“The recovery of the Chinese economy is constrained by quarantine restrictions and a downturn in the real estate market, and therefore we expect China’s GDP to increase by 2.8% in 2022 and grow by 4.5% next year,” Fitch said in a review. In July, the growth of the Chinese economy was predicted by 3.7% and 5.3%, respectively.
High and persistent inflation and rising inflationary expectations are forcing the Federal Reserve (Fed), the Bank of England and the European Central Bank (ECB) to become more hawkish in recent months, Fitch said. The base interest rates of the world’s leading central banks are rising at a much faster rate than one might expect.
According to Fitch’s forecast, the Fed will raise the rate to 4% by the end of this year and keep it at this level throughout 2023, while the ECB will bring the lending rate to 2% by December of this year. The base rate of the Bank of England will reach 3.25% by February 2023, agency experts believe.
