Moody's downgrades global growth forecast due to war in Ukraine and restrictions in China

Russia will be the only G20 economy to enter a recession, with a contraction of 7% in 2022 and 3% in 2023

MADRID, 26 May. (EUROPA PRESS) -

The world economy will grow less than expected as a result of the impact on supply problems and inflation of the war in Ukraine and the restrictions imposed in China to contain the Covid-19 pandemic, according to the Moody's agency, which only anticipates the Russia's entry into recession among the G20 economies.

In this way, the risk rating agency expects world GDP to grow by 3.1% this year, slowing down from 5.9% in 2021 and half a percentage point below what Moody's expected last March, while for the Next year, the agency forecasts that global activity will continue to lose momentum, with an estimated growth of 2.9% in 2023, slightly below the average of the decade before the pandemic.

In the case of advanced economies, Moody's forecasts that GDP will grow by 2.6% in 2022, compared to the 3.2% anticipated last March, with an estimated expansion of 2.1% for 2023. For emerging economies, For its part, the agency has lowered the growth forecast this year to 3.8% from 4.2% and anticipates an expansion of 4.2% in 2023.

In this regard, Moody's analysts warn that the coming months "will be critical", since, if the global economy can resist during this period, the growth path could become more sustainable during the next year.

"Except for Russia, we currently do not expect a recession in any G-20 country in 2022 or 2023," said Madhavi Bokil, senior vice president/CSR at Moody's, for whom, however, 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.

Likewise, the expert pointed out that aggressive monetary tightening, amid concerns about the de-anchoring of long-term inflation expectations, "could also become a catalyst for a recession."

Among the major G20 economies, the agency expects US GDP growth to moderate to 2.8% in 2022 and 2.3% in 2023, after expanding 5.7% in 2021, with the inflation gradually moderating to 4.9% this year and 2.1% a year later, while unemployment will remain at 3.5% during the analyzed horizon.

In the case of the euro zone, the risk rating agency forecasts a growth of 2.5% in 2022 and 2.3% in 2023, compared to the expansion of 5.3% in 2021.

Among major emerging economies, Moody's expects China's GDP to grow 4.5% this year and accelerate to 5.3% next, while India's GDP will rise 8.8% in 2022 to moderate to 5.4% one year later.

As for Russia, the agency warns that its economy will enter a recession, with a GDP contraction of 7% in 2022 and an additional drop of 3% in 2023, while the inflation rate could climb to 16.2% this year to moderate to 10% a year later.