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3 Mar, 2023 05:29

Recession coming to major Western economies – Fitch

Germany and Italy will face a downturn by the end of the year despite relief measures, the rating agency predicts
Recession coming to major Western economies – Fitch

Germany and Italy will slide into recession by the end of the year as inflation continues to rise, Fitch Ratings told Bloomberg on Thursday.

Although the downturn is not expected to be “severe,” the head of sovereigns and supranationals at Fitch, James McCormack, says that “recession is significant in and of itself.”

Inflation in Germany, the EU’s largest economy, accelerated in February, rising 9.3% on the year and 1% on the month, according to the latest figures from Germany’s Federal Statistical Office (Destatis). Surging food and energy prices dealt a major blow to the country’s economy despite relief measures taken by the government.

The German economy shrank by 0.4% quarter-on-quarter in the final three months of 2022. The contraction came in larger than the previously estimated 0.2% GDP drop.

In Italy, the EU’s third largest economy, consumer prices rose 9.2% in February compared with the same period last year, down from a 10% increase in January, preliminary data from the country's statistics agency ISTAT showed on Thursday.

Purchasing power in the country more than halved over the past year, according to a report by the think tank Nomisma, which said that one in seven Italians complained they earned less than they required to make ends meet. A quarter of those surveyed said they spent all their money on essentials while 26% of Italian households said they feared not making it to the end of the month.

The US is also at risk of a “modest” recession by the end of the year, McCormack told Bloomberg, adding that the “UK is already probably there.”

The economist also pointed out that governments around the world are struggling to tackle the cost-of-living crisis sparked by surging food and energy prices since the start of conflict in Ukraine. So far there is little optimism about a rapid recovery and the rising costs have sent ripples of instability throughout the global economy.

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