Ukrainian President Volodymyr Zelensky (2nd R) listening to explanations during a military drill outside the city of Rivne, northern Ukraine. (Photo by Handout / Ukrainian Defence ministry press-service / AFP

Growth forecasts slip on Russia-Ukraine, China lockdowns

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Moody’s has lowered global growth projections for 2022 and 2023 as Russia’s invasion of Ukraine and pandemic lockdowns in China add to supply shocks and stoke inflation.

Advanced economies will expand 2.6% in 2022 and emerging market countries will grow 3.8%, down from March forecasts of 3.2% and 4.2%, respectively, Moody’s Investors Service said in a report issued on Friday.

Currently high inflation rates could persist for several more months, owing to elevated energy and food prices.

“Except for Russia, we do not currently expect a recession in any G-20 country in 2022 or 2023,” said Madhavi Bokil, Senior Vice President-CSR at Moody’s.

“Still, 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.

“Aggressive monetary tightening, amid worries of long-term inflation expectations getting unanchored, could also become a catalyst for a recession.”


The next few months will be critical, the Moody’s report added.

Overall, if the global economy can remain resilient over this period, the growth path could become more sustainable through next year, Moody’s said.

Economies are returning to a post-pandemic normal, which involves reversals of some economic patterns to pre-COVID trends and permanent changes to others. As pandemic disruption wanes, households are once again spending more of their incomes on high-contact service activities and buying fewer goods.

The rating agency concluded that as central banks shift to tighten monetary policy in response to higher inflation, there has been a rise in financial market volatility and asset repricing.

“Bond yields the world over have risen in anticipation of further interest rate hikes, equity prices have fallen from their peaks and the US dollar has strengthened,” the report said.