Global economic growth keeps being hampered as inflation ramps up the pressure on the markets, according to the Global Economic Outlook (GEO) of Fitch Ratings.
China also has to contend with the additional challenge of the lockdown due to COVID. This, in turn, affects their manufacturing supply chain pressures. The Ukraine conflict also had a diminishing effect on European inflation than anticipated.
The effects of inflation pressure were also felt in the service sectors of the United States and the United Kingdom. These two countries are known to have their nominal wage growth boosted by growth in their tight labour force.
As a result of the continued effect of ever-increasing inflation, Fitch Ratings had to revisit their forecast reports, which increased the inflation anticipation and reduced the GDP growth for several countries, especially those in Europe.
Continued Effect of Increasing Inflation Leads to a Drop in World GDP Forest
Therefore, the world’s GDP growth for the year has been revised downward from the Global Economic Outlook report in March to 2.9%. China, ravaged by the Corona Virus, has seen its GDP growth forecast fall to 3.7% from the last figure of 4.8% in March. The US drops to 2.9%, while Europe also shifts downward to 2.6%. The general world growth forecast for the next year has been reduced to 2.7%.
The reason for the drop in the forecast is that China, still under the dynamic-zero ‘Covid-19 policy, is expected to continue declining its GDP. Inflation is set to affect consumer income in Europe. While the US has strong support from a tremendous increase in jobs and nominal wages to balance consumer spending, towards the middle of next year, the growth rate is expected to reduce due to tighter monetary policies.
As a result, the dollar, the euro, and the yuan are set to experience the impact of general inflation at different times and rates.
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