Fitch Ratings has said it expects global growth to grow at a mere 1.7% in 2023 and 2.4% in 2022, a cut of 1 percentage point and 0.5 percentage point (pp), respectively.
Talking about India, Fitch said, compared to our June forecasts we now expect the (Indian) economy to grow 7% in the financial year to end-March 2023 (FY23) from 7.8% previously, with FY24 also slowing to 6.7% from 7.4% before.
Three main reasons that Fitch highlighted for this global growth rate forecast are: European gas crisis, high inflation, and a sharp acceleration in the pace of global monetary policy tightening are taking a heavy toll on economic prospects.
It further said, “The eurozone and UK are now expected to enter recession later this year and Fitch forecasts that the US will suffer a mild recession in mid-2023.”
Fitch said, “China’s recovery is constrained by Covid-19 pandemic restrictions and a prolonged property slump, and we now expect growth to be 2.8% this year and to recover to 4.5% next year, downward revisions of 0.9 pp and 0.8 pp, respectively.”
“We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China,” said Brian Coulton, Chief Economist.
On US Federal Reserve's interest rate hikes, Fitch said, :The Fed is now expected to take rates to 4% by year-end and hold them there through 2023; the ECB refinancing rate is expected to rise to 2% by December; and the BOE Bank Rate is forecast to reach 3.25% by February 2023. The Fed and BOE are in quantitative tightening mode, with the BOE planning outright bond sales."
“In contrast to the role of quantitative easing in the pandemic, central bank policies are no longer supportive of fiscal easing to protect households and firms from economic shocks. With liquidity conditions tightening, large-scale fiscal easing could push up long-term real interest rates,” it concluded.