International rating agency Fitch Ratings worsened the forecast of global economic growth in 2022 to 2.9% from 3.5% expected in March, including due to higher inflation.

The most significantly revised estimate of China’s GDP lift was revised to 3.7% from 4.8%. In addition, the US economy is now expected to grow by 2.9% (previously 3.5%) and the eurozone by 2.6% (previously 3%).

Fitch also worsened its forecast for global GDP growth in 2023 to 2.7% from 2.8% assumed three months ago.

“Global inflationary pressures continue to build with increasingly unfavorable implications for economic growth prospects,” the updated Global Economic Outlook (GEO) said. – Recent lockdowns in China are adding pressure on global manufacturing supply chains. Energy and food supply disruptions due to the war between Russia and Ukraine are having a larger impact on European inflation than expected.”

Inflationary pressures are also intensifying in the services sector, particularly in the US and UK, where tight labor market conditions are driving up wages. As a result, Fitch has significantly and sharply revised upward its inflation forecasts, especially for Europe for the second half of this year.

The Shanghai lockdown will cause PRC GDP to decline in the second quarter relative to the previous three months. As the zero-tolerance policy for COVID-19 continues to be in place, agency analysts do not see room for a quick recovery in the country’s economy.

The U.S. economy has near-term growth momentum, with consumer spending supported by job and wage gains. But the upturn should slow from mid-2023 to barely positive on a quarterly basis due to more aggressive monetary tightening.

Fitch forecasts U.S. growth to fall to 1.5% in 2023 and 1.3% in 2024. Historical experience points to a significant risk of recession in the US following a sharp tightening of the MPC.

“Inflationary concerns have become so pronounced that central banks are forced to react by abandoning previous intentions and forecasts. The risk of inflation becoming entrenched is too great to ignore,” believes Fitch chief economist Brian Coulton.

The agency’s analysts now expect the Federal Reserve to raise the benchmark interest rate to 3% per annum by the fourth quarter of this year and to 3.5% per annum by the first quarter of next year. The Bank of England is forecast to raise it to 2% and 2.5% per annum respectively.

The European Central Bank will raise the rate by 100 basis points this year and by 50 bps in 2023, experts believe. Now it is at the zero level.