Fitch Ratings has raised its growth forecast for Türkiye for this year, but lowered its global estimate, as the energy crisis, high inflation and the pace of global monetary policy tightening take a heavy toll on economic prospects.
The global rating agency expects world gross domestic product (GDP) to grow 2.4% in 2022 – revised down 0.5 percentage points from the 2.9% estimate it made in June, according to its Global Economic Outlook September 2022 report released Wednesday.
It sees the global economy growing by just 1.7% in 2023, a cut of 1 percentage point from its previous forecast of 2.7%.
The Turkish economy, on the other hand, is forecast to expand by 5.2% in 2022. It earlier expected the economy to expand 4.5% this year. The agency said Turkish GDP should grow 2.9% in 2023, slightly down from its previous forecast of 3%.
Fitch noted that the Turkish economy showed strong growth in the second quarter with gains in consumption and exports.
The eurozone and the United Kingdom are now expected to enter recession later this year and Fitch forecasts that the U.S. will suffer a mild recession in mid-2023.
"We’ve had something of a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate hikes and a deepening property slump in China," chief economist Brian Coulton said in the report.
"The forecast now assumes a full or near complete shut-off of Russian pipeline gas to Europe. Despite EU efforts to find alternatives, total EU gas supply will fall significantly in the near term, with impacts felt through industrial supply chains," the report noted.
Europe is grappling with an energy crisis fueled by Russia's invasion of Ukraine. Rocketing gas prices have driven up inflation, pushed some utilities to the brink and threatened recession, prompting urgent proposals by European executives to protect consumers and businesses.
Fitch expects the eurozone economy to grow 2.6% in 2022 but contract 0.1% in 2023, which is a drop of 0.3 and 2.2 percentage points, respectively, compared to the June forecast, due to "the impact of the natural gas crisis."
It forecasts the American economy to grow 1.7% in 2022 and 0.5% in 2023, which are revised down by 1.2 and 1 percentage points, respectively.
"High and persistent inflation, elevated near-term inflation expectations and tight labor markets have prompted the Fed, Bank of England (BoE) and ECB (European Central Bank) to turn more hawkish in recent months. Policy rates are increasing much more rapidly than expected," the report said.
China’s economy is expected to grow 2.8% this year and 4.5% next year – revised down by 0.9 and 0.8 percentage points, respectively, as the world’s second-largest economy is "constrained by COVID-19 pandemic restrictions and a prolonged property slump," it said.