The global rating firm lowered the country’s growth expectations for 2023 from 5.5% to 5.4%, citing a global impact on growth due to the fallout from Russia’s invasion of Ukraine.
The global rating firm lowered the country’s growth expectations for 2023 from 5.5% to 5.4%, citing a global impact on growth due to the fallout from Russia’s invasion of Ukraine.
Moody’s Investors Service has cut India’s growth forecast for calendar year 2022 from 9.5% to 9.1% and marginally lowered its growth forecast for 2023 to 5.4% from 5.5%, following Russia’s invasion of Ukraine. citing the global impact on growth as the reason for the decline.
The global ratings firm, which raised India’s GDP growth numbers for 2022 to 9.5% from 7% a month ago, said it is now downscaling its global growth outlook and is looking at commodity prices, supply and demand. raising inflation forecasts in light of the uptick in inflation. Weak sentiment for shortages, business disruptions and geopolitical conflict.
Moody’s said India was particularly sensitive to higher oil prices as it was a major importer of crude, although as a surplus grain producer, its agricultural exports could benefit in the short term from higher global prices.
“Higher fuel and potential fertilizer costs down the road will weigh on government finances, potentially limiting planned capital expenditure,” citing these as reasons for the growth forecast below 0.4 percentage points. For example, India benefited from wheat exports, Moody’s reported.
While the extent of damage to the global economy will depend on the duration and extent of the Russia-Ukraine conflict, Moody’s said recovery has been affected but not yet derailed. However, alternative downside scenarios envision a global economy headed for recession, even as other risks such as new COVID-19 waves, monetary policy missteps, and social risks associated with high inflation, increase growth. perspective can be reduced.
“We now expect G-20 economies to collectively expand by 3.6% in 2022, compared to 4.3% growth envisioned in our February outlook. Growth will slow further to 3% in 2023,” The rating firm said Russia was the only G-20 nation to see a contraction.
‘Russian economy will shrink’
“We forecast Russia’s economy to shrink 7% this year and 3% in 2023, down from the 2.0% and 1.5% projected growth respectively before the invasion of Ukraine,” it noted.
In its global macroeconomic outlook released on February 24, the day Russia launched military operations in Ukraine, Moody’s said India was moving towards normalcy, but was less optimistic about the prospects for the global economy.
“The first half of 2022 will be challenging. Rising commodity prices, demand-supply imbalance, inflationary pressures, volatile financial markets and geopolitical tensions will create a challenging backdrop.
At the time, it had flagged its ‘bear scenario’, a more likely outcome due to its tilt towards a balance of risk. In that scenario, Moody’s predicted that increased inflation would be accompanied by weak growth, with sanctions on Russia resulting in a substantial decline in energy supplies, driving up oil and gas prices.