Global growth forecasts for 2022 and 2023 are lower as Russia's invasion of Ukraine and pandemic lockdowns in China add to supply shocks and stoke inflation, said Moody’s recently.
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, the credit rating agency pointed out.
Currently high inflation rates could persist for several more months because of elevated energy and food prices, the firm added.
"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.
In addition, there are multiple risks that could further undermine global growth, including additional upward pressure on commodity prices, longer-lasting supply-chain disruptions, or a larger than expected slowdown in China, Bokil observed.
Aggressive monetary tightening, amid worries of long-term inflation expectations getting unanchored, could also become a catalyst for a recession, she added.
The next few months will be critical, according to Bokil.
“Overall, if the global economy can remain resilient over this period, the growth path could become more sustainable through next year,” she predicted.
Economies are returning to a post-pandemic normal, which involves reversals of some economic patterns to pre-COVID trends and permanent changes to others, she added.
As pandemic disruption wanes, households are once again spending more of their incomes on high-contact service activities and buying fewer goods, Moody’s said.
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, the firm pointed out.
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, Moody’s added.