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10 Dec, 2022 05:56

Global growth forecast slashed

The world economy is expected to grow in 2023 by less than previously expected, says Fitch Ratings
Global growth forecast slashed

International agency Fitch Ratings said on Tuesday it has once again revised down global gross domestic product (GDP) forecasts for next year. It attributed the outlook cut to rising inflation and the worsening prospects for China’s property market.

Fitch now expects world GDP to grow by 1.4% in 2023, revised down from the 1.7% figure in its September Global Economic Outlook.

The ratings agency lowered its forecast for US growth next year to 0.2%, from 0.5%, as the pace of monetary policy tightening increases. It also cut its China growth forecast to 4.1%, from 4.5%, “as prospects for a recovery in housebuilding fade.” 

At the same time, Fitch improved its growth outlook for the Eurozone in 2023 to 0.2%, from -0.1%, noting that the region’s gas crisis had eased a little, but said sharper ECB rate rises would weigh on demand.

The report said the risk of natural gas shortages in the EU and rationing this winter had receded due to the surge in LNG imports and decline in gas consumption. However, the crisis is far from over and high wholesale gas prices continue to weigh heavily on firms’ costs and household budgets, Fitch said.

“Taming inflation is proving to be harder than expected as price pressures broaden and become more entrenched. Central bankers are having to take the gloves off. That won’t be good for growth,” said Brian Coulton, Chief Economist at Fitch.

The report highlighted that recessions are expected in the Eurozone and UK starting in late 2022, and in the US in second and third quarters of 2023. Unemployment is likely to rise to above 5% in the US and UK next year.

“The impact of monetary tightening on the economy is already visible - particularly in housing markets - but broader effects on demand and job markets will become more apparent over time,” Fitch warned.

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