HomeBusinessRating agency Fitch cuts global growth forecast, sees recession in UK and...

Rating agency Fitch cuts global growth forecast, sees recession in UK and US closer

Rating agency Fitch Ratings’ September 2022 Global Economic Outlook (GEO) said the European gas crisis, high inflation and a tighter pace of global monetary policy are weighing heavily on economic prospects.

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European wholesale gas and electricity prices have risen almost tenfold. Fitch now expects world GDP to grow by 2.4% in 2022 – a 0.5% mark since June’s estimate revised upwards – and only 1.7% in 2023, a cut of 1%.

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The eurozone and the UK are now expected to enter recession later this year and the global rating agency estimates the US to face a mild recession in mid-2023.

“We have seen a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp rise in interest rates and a sharp drop in assets in China,” said Brian Colton, chief economist.

Fitch expects the eurozone economy to shrink 0.1% in 2023 – a 2.2% decline since June that reflects the impact of the natural gas crisis.

It expects the Indian economy to grow from 7.8% estimated earlier in the fiscal year to 7% by the end of March 2023, with 2023-24 also slowing to 6.7% from the 7.4% projected. In the US, growth is seen at 1.7% in 2022 and 0.5% in 2023, revised up by 1.2% points and 1% points, respectively.

“China’s recovery is constrained by the COVID-19 pandemic restrictions and prolonged asset decline, and we now expect growth to recover to 2.8 percent this year and 4.5 percent next year, down 0.9 pp and 0.8 pp. amendments, respectively,” the agency said in a statement.

Despite the EU’s efforts to find alternatives, it said total EU gas supply would fall significantly in the near term, the impact of which would be felt through industrial supply chains. Against the backdrop of high inflation, central banks such as the US Fed, the Bank of England (BoE) and the ECB have become more stringent in recent months and policy rates have risen faster than expected.

The rating agency said the US Fed now expects to take rates to 4% by the end of the year and keep them there until 2023; The ECB refinancing rate is expected to rise to 2% by December, and the BOE Bank rate is projected to reach $3.25 by February 2023. Raising interest rates is a monetary policy instrument that generally helps to suppress demand in the economy, thereby helping inflation to decrease.

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