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Economic Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation, Article Says

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S&P Global has updated its economic growth forecasts, expecting a decline in U.S. growth by 80 basis points to 2.4%, eurozone growth to drop by 60 basis points to 2.7%, and China's growth to fall by 70 basis points to 4.2%. The adjustments are attributed to worsening macroeconomic conditions, including the prolonged Russia-Ukraine conflict, rising energy prices, and persistent inflation, which is now broader and more sustained than previously anticipated. The outlook remains cautious, with risks skewed to the downside.

Positive
  • None.
Negative
  • U.S. growth forecast lowered by 80 basis points to 2.4%.
  • Eurozone growth forecast decreased by 60 basis points to 2.7%.
  • China's growth forecast reduced by 70 basis points to 4.2%.
  • Overall economic outlook indicates increased risks and a deteriorating macro picture.

NEW YORK, May 18, 2022 /PRNewswire/ -- A number of macro variables have deteriorated since our most recent economic growth forecast at the end of March, said S&P Global in its article "Global Macro Update: Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation." We've marked down our GDP forecasts due to weaker first-quarter numbers in many countries, higher energy and commodity prices, a longer-than-expected Russia-Ukraine conflict, faster monetary policy normalization, and slower Chinese growth.

The global economy continues to face an unusually large number of negative shocks. 

"We now expect U.S. growth to decline by 80 basis points to 2.4%, eurozone growth to drop by 60 basis points to 2.7%, and China's growth to fall by 70 basis points to 4.2%. Changes to 2023-2025 are relatively minor," said Global Chief Economist Paul Gruenwald. "The balance of risks to our baseline has deteriorated since our last forecast and remains firmly on the downside."

The global economy continues to face an unusually large number of negative shocks. At the beginning of 2022, the effects of the COVID-19 pandemic were in retreat in most geographies. As a result, we forecast a robust but uneven rebound, with above-trend growth in most countries and moderately high but transitory inflation. The main questions were when economies would regain their pre-COVID-19 path of output, and what changes brought about by the pandemic would be structural.

Two developments have altered the macro picture. One is Russia's invasion of Ukraine in late February. This sent energy and commodities prices (even) higher for (even) longer and put a dent in confidence, which was at high levels. The second is inflation, which has turned out to be higher, broader based, and more persistent than thought just a few quarters ago.

This report does not constitute a rating action. 

Media Contact:

Orla O'Brien, New York (1) 857-407-8559
orla.obrien@spglobal.com

S&P Global Ratings is the world's leading provider of independent credit ratings. Our ratings are essential to driving growth, providing transparency and helping educate market participants so they can make decisions with confidence. We have more than 1 million credit ratings outstanding on government, corporate, financial sector and structured finance entities and securities. We offer an independent view of the market built on a unique combination of broad perspective and local insight. We provide our opinions and research about relative credit risk; market participants gain independent information to help support the growth of transparent, liquid debt markets worldwide.

S&P Global Ratings is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.spglobal.com/ratings.

 

 

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SOURCE S&P Global

FAQ

What are the new U.S. growth forecasts by S&P Global for 2022?

S&P Global has lowered the U.S. growth forecast by 80 basis points to 2.4%.

How has the Russia-Ukraine conflict impacted economic forecasts?

The prolonged Russia-Ukraine conflict has led to increased energy prices and a negative impact on economic growth forecasts.

What is the updated growth forecast for the Eurozone according to SPGI?

The growth forecast for the Eurozone has been reduced by 60 basis points to 2.7%.

What is the current growth forecast for China by S&P Global?

China's growth forecast has been lowered by 70 basis points to 4.2%.

What are the main reasons for the economic forecast adjustments?

The adjustments are due to weaker first-quarter data, rising commodity prices, and persistent inflation.
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