Moody’s lowers world growth forecasts

Citing the negative effects of Russia’s invasion of Ukraine and China’s ongoing Covid-19 lockdowns, Moody’s Investors Service downgraded its global economic growth forecasts.

In a report, the rating agency said it now sees growth in the world’s advanced economies this year coming in at 2.6%, down from its previous forecast of 3.2%. The agency also lowered its call for emerging markets to 3.8% from 4.2%.

“Except for Russia, we do not currently expect a recession in any G20 country in 2022 or 2023,” said Madhavi Bokil, senior vice-president with Moody’s, in a release. “Still, there are multiple risks that could further undermine the economic outlook, including additional upward pressure on commodity prices, longer-lasting supply-chain disruptions, or a larger-than-expected slowdown in China.”

Bokil added, “Aggressive monetary tightening, amid worries of long-term inflation expectations getting unanchored, could also become a catalyst for a recession.”

Given the array of risks, Moody’s said the next few months will be critical.

“Overall, if the global economy can remain resilient over this period, the growth path could become more sustainable through next year,” it said.

Increasingly, economies are finding their new, post-pandemic normal, the report said, “which involves reversals of some economic patterns to pre-Covid trends and permanent changes to others.”

At the same time, as central banks tighten monetary policy in response to high inflation, financial market volatility has increased, Moody’s noted: “Bond yields the world over have risen in anticipation of further interest rate hikes, equity prices have fallen from their peaks and the U.S. dollar has strengthened.”

Staff

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