Credit rating agency Moody’s has downgraded India’s growth forecast to 9.1 per cent from its earlier estimate of 9.5 per cent for CY 2022.
The escalating fuel and fertilizer costs are burdening the government finances and thereby creating impediments to the government’s planned capital expenditure, which is why the rating agency has to revise the forecast.
The global rating firm, which upgraded India’s GDP growth number for 2022 from 7% to 9.5% just a month ago, pared down the country’s growth from 5.5% to 5.4%. It said it lowered the growth and raised inflation estimate as the commodities prices have seen a significant surge, supply shortages, business disruptions, and disturbing sentiments due to geopolitical tensions.
India is particularly at risk with higher oil prices. It heavily depends on imports of crude oil, although as a surplus grain producer, its agricultural exports could see a boost in the short term from the surging prices globally, Moody’s said.
“High fuel and potentially fertilizer costs would weigh on government finances down the road, potentially limiting planned capital spending,” citing the reason for downgrading growth forecast. Notably, India can earn an advantage on wheat exports, Moody’s pointed out.
The immensity of destruction to the global economy would depend on how long the Russia-Ukraine conflict lasts. According to Moody’s, the recovery has been hampered but not halted.
“We now expect the G-20 economies to expand 3.6% collectively in 2022, compared with 4.3% growth envisioned in our February outlook. Growth will further slow to 3% in 2023,” the rating firm said, adding Russia would be the only G-20 nation to see negative growth.
Moody’s estimates Russia’s economy to shrink 7% this year and 3% in 2023, lower than the previously projected growth of 2.0% and 1.5%, respectively.
South Korea:
The rating firm slashed the 2022 growth outlook for the South Korean economy to 2.7 percent, citing the economic fallout of the Ukraine crisis. In February, it estimated a 3 percent growth.
Moody’s also cut down the 2023 growth forecast for South Korea’s economy to 2.6 percent from 2.7 percent.
According to the rating agency, South Korea and Japan, two of the G-20 countries, are likely to face new supply issues owing to the interruptions caused in the manufacturing of semiconductors and automobiles.
“Higher energy costs will also weigh down growth in the two countries, which are both reliant on imported crude oil,” Moody’s said.
Moody’s increased its estimate for South Korea’s inflation growth rate to 3.9 percent in 2022, up from 2.8 percent previously.