As the world heads towards the end of 2022 amid the war in Ukraine, the fear of a global recession is intensifying by the day. Global agencies like the World Bank, International Monetary Fund, etc. reduce economic growth in several countries in a context of high inflation and record rate hikes.
Citing China’s slowdown due to strict Covid-19 lockdown restrictions, the World Bank also downgraded the economic outlook for East Asia and the Pacific in 2022.
The East Asia and Pacific region, which includes China, is expected to slow to 3.2% from its forecast 5.0% in April, the World Bank said. The international body, however, said the pace of expansion would pick up next year.
The bank said China’s slowdown has disrupted industrial production, domestic sales and exports. China accounts for 86% of the region’s 23-country economic output and is expected to grow 2.8% this year compared to the previous forecast of 5.0%.
Additionally, the Organization for Economic Co-operation and Development (OECD) said on Monday that the global economy will be hit harder than expected next year.
The Paris-based intergovernmental organization, in a grim report titled “paying the price of war,” said the conflict in Ukraine had sparked inflationary pressures when the cost of living was already rising rapidly.
He said the global economy is still dealing with the impact of the deadly Covid-19 pandemic and growth has also been hit by high interest rates as central banks struggle to control inflation.
In India, economic activity further rejuvenated in September 2022 compared to August 2022 due to the start of the festive season, said Saket Dalmia, president of the PHD Chamber of Commerce and Industry.
However, even though economic activities in India have seen strong increases in terms of growth rate, the recovery above pre-Covid levels is incomplete and India is unlikely to be immune to the global downturn, said Kotak Mahindra Bank in a recent report.
“The pace of economic activity is accelerating thanks to the start of the festive season complemented by the various structural reforms undertaken by the government over the past 2 years,” Dalmia said.
Recently, many international agencies have revised India’s Gross Domestic Product (GDP) growth forecasts due to rising inflation and rising policy interest rates.
World Bank and India:
On October 6, the World Bank cut its growth forecast for India for 2022-2023 to 6.5% year-on-year from a previous estimate of 7.5%, down 1% from its previous June 2022 projections. The World Bank cited the deteriorating international environment for this downgrade.
International Monetary Fund (IMF):
Another global economic body, the IMF, has also cut its projection for India’s economic growth in 2022 to 6.1%. However, its growth is estimated to be the fastest among major economies.
Behind India were China (4.4%), Saudi Arabia (3.7%) and Nigeria (3%).
In its annual report on the outlook for the world economy, the IMF said that the United States (United States) is expected to grow by 1% while Russia, Italy and Germany are expected to suffer a decline. economic growth, the IMF said.
“The global economy continues to face significant challenges, shaped by the lingering effects of three powerful forces: the Russian invasion of Ukraine, a cost of living crisis caused by persistent and growing inflationary pressures, and the slowdown in China,” he said. .
S&P Global Ratings:
Earlier, US ratings agency S&P Global Ratings estimated India’s economic growth at 7.3% for the current fiscal year, with downside risks. In its economic outlook for Asia-Pacific, the agency said we have maintained our growth outlook for India at 7.3% for fiscal year 2022-2023 and 6.5% for the next fiscal year. .
He also mentioned that inflation is expected to remain above the Reserve Bank of India’s (RBI) 6% upper tolerance threshold until December 2022. India’s economic growth in 2023 will be supported by the recovery in demand interior after the Covid-19 pandemic, according to the report. said.
Asian Development Bank (ADB):
The Asian Development Bank (ADB) has lowered India’s economic growth projection for 2022-23 to 7% from 7.2%. According to the bank, this step is due to higher than expected inflation in India and monetary tightening by the Reserve Bank of India.
The AfDB said in a report that India’s economy grew by 13.5% year-on-year (YoY) in the first quarter of 2022-23, witnessing strong growth in services.
Another ratings agency, Fitch, also cut India’s GDP growth forecast to 7% for fiscal 2023 from 7.8% in its previous projection. The move came in the wake of a global slowdown and tighter monetary policy. Apart from this, the agency also cut FY24 estimates to 6.7% from 7.4% previously.
Meanwhile, World Bank President David Malpass said the global economy was dangerously close to a recession. He added that there must be targeted assistance for the poor.
The head of the World Bank informed that the growth rate has been reduced from the growth forecast for 2023 of 3% to 1.9% for global growth.
“It’s dangerously close to a global recession and a global recession could occur under certain circumstances,” Malpass said.
Malpass also noted that the debt accumulation of developing countries is mainly due to high interest rates as their currencies continue to weaken.