Moody’s on Thursday lowered the calendar-year 2022 growth forecast for India to 8.8 percent from its March forecast of 9.1 percent while maintaining country’s 2023 growth forecasts at 5.4 percent.

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“High-frequency data suggest that the momentum from Q4 of 2021 carried through into the first four months of this year because of strong reopening momentum. Strong credit growth, a large increase in investment intentions announced by the corporate sector, and a high budget allocation to capital spending by the government led to the strengthening of the investment cycle,” Moody’s said in the May update of its Global Marco Outlook 2022-23.

“However, the rise in crude oil, food, and fertilizer prices will weigh on household finances and spending in the months ahead. Rate increases to prevent energy and food inflation from becoming more generalised will slow the demand recovery's momentum. But unless global crude oil and food prices rise further, the economy seems strong enough to maintain solid growth momentum,” the update said.

Global outlook

Moody’s also predicted that the global economic growth will further slow to 2.9 percent in 2023, a little below the average growth rate in the decade before the pandemic.

It has also lowered 2022 growth projections for G-20 economies to 3.1 percent in 2022, down from 5.9 percent growth in 2021. This forecast is half a percentage point lower than the 3.6 percent growth estimated in our March outlook.

“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 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,” Bokil added.

The advanced economies are expected to grow at 2.6 percent in 2022, 1.2 percent less than the growth of the emerging market countries. Moody’s had earlier expected advanced and emerging markets to grow at 3.2 percent and 4.2 percent, respectively, the update said.

Moody’s reasoned that multiple risks could further dampen economic growth- a larger-than-expected slowdown of China's economy, ongoing monetary policy tightening, and new waves of COVID-19.

According to the Moody’s, several crosscurrents have hit the global economy all at once and will slow the growth envisaged a few months ago. The economic spillovers of the Russia-Ukraine military conflict are still unfolding as well as effect on global growth from the slowdown in China amid strict enforcement of its zero-COVID policy. Inflation rates are expected to ease through next year, price levels is expected to remain high and will weigh on consumer demand.

(Edited by : Sudarsanan Mani)