On Tuesday, international ratings agency Fitch Ratings noted it has once again downgraded its global Gross Domestic Product (GDP) forecasts for the coming year. It said the downgrade resulted from rising inflation and China’s deteriorating property market.

The agency predicted World GDP will grow by 1.4% next year, a downward revision from the 1.7% figure it had listed in its September Global Economic Outlook.

Fitch also downgraded its US forecast for the coming year, from 0.5% to 0.2%, due to the increased tempo of fiscal tightening by the Federal Reserve. Its Chinese growth forecast was also downgraded, from 4.5% to 4.1%. “as prospects for a recovery in housebuilding fade.”

Not every forecast was downgraded however. Fitch’s Eurozone outlook in 2023 rose, from -0.1% to 0.2%. It noted that faster European Central Bank rate increases would weigh on demand, however the gas crisis is proving less onerous than it had appeared it would be.

A surge in LNG imports, as well as a reduction in usage had worked together to reduce the likelihood of shortages and rationing this winter. Fitch noted, however that the crisis is far from over, and high gas prices and energy costs will weigh heavily on consumer’s pocketbooks, as well as business overhead going forward.

Brian Coulton, Chief Economist at Fitch said, “Taming inflation is proving to be harder than expected as price pressures broaden and become more entrenched. Central bankers are having to take the gloves off. That won’t be good for growth.” 

The report pointed out that it still expects recessions in the UK and the Eurozone beginning in late 2022. It expects the US to follow on, with its recession beginning in the second and third quarters of 2023. It also predicted unemployment will likely rise above 5% in the UK and the US next year.

Fitch warned, “The impact of monetary tightening on the economy is already visible – particularly in housing markets – but broader effects on demand and job markets will become more apparent over time.”