Fitch downgrades Global GDP Growth to 3.5 percent

March 22, 2022

295

Fitch Ratings lowered its forecast for global GDP growth to 3.5% in 2022, down 0.7% due to worsening inflation concerns. And Russia’s invasion of Ukraine threatens the global energy supply.

In its latest Global Economic Outlook report for March 2022, the ratings agency said that the outlook for global GDP growth has deteriorated significantly as a result of sharply revised inflation expectations.

“Global inflation is back after at least two decades of absence. This is starting to feel like a time for inflationary change,” said Brian Coulton, chief economist at Fitch Ratings.

Huge global supply shocks which will reduce growth and increase inflation, are affecting the recovery from the COVID-19 pandemic. Russia’s invasion of Ukraine and subsequent economic sanctions against Russia have jeopardized the global energy supply. The boycott is unlikely to be lifted any time soon.

Russia supplies about 10% of the world’s energy, (17% of natural gas and 12% of oil). Rising oil and gas prices will increase production costs and reduce real consumer incomes. If supplies from Russia suddenly stop There could be a general shortage and distribution of energy in Europe. Rising energy prices are a matter of course.

Fitch has lowered its 2022 GDP growth forecast for the Eurozone by 1.5 percentage points. up to 3.0% and for the USA by 0.2 p.p. to 3.5%, reflecting the impact of higher energy prices. but also an increase in the interest rate in the United States. Faster-than-expected, Fitch downgraded its 2023 global growth rating by 0.2 p.p. up to 2.8%.

In 2019, Russia supplies about a quarter of the eurozone’s main energy carriers. This corresponds to the share of OPEC oil production in world primary energy production in 1973. Diversifying into other sources may take some time. Inflation in the euro area in 2022 will average 5% due to rising gas prices in the EU. Some financial support is likely to cushion the shock.

Inflationary problems and falling supply could have a significant impact on global GDP growth. If it leads to a sudden tightening of the Fed It pushed oil prices to $150 a barrel for a long time. and in parallel with widespread energy rationing in Europe. she added