Fitch lowers global growth estimates, raises Turkish economy forecast

Fitch Ratings lowered its global economic growth estimates but raised the growth forecast for the Turkish economy, according to its Global Economic Outlook September 2022 report released Wednesday.

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.

The global economy is anticipated to grow 1.7% in 2023 -- down a percentage point from the previous forecast of 2.7%.

"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.

Fitch said the eurozone and the UK are expected to enter recessions later this year, while it forecast the US economy will suffer a mild recession in 2023.

The agency 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 forecast 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.

The Turkish economy, on the other hand, is forecast to expand 5.2% in 2022 and 2.9% in 2023.

The recent estimate for 2022 is an upward revision from the previous figure, which had anticipated the Turkish economy to grow 4.5% in 2022.

Fitch noted that the Turkish economy showed strong growth in the second quarter with gains in consumption and exports.