Rising rates and increased energy insecurity in Europe are hurting almost every country’s growth, according to S&P Global Ratings, but India, with an anticipated 7.3% growth this fiscal, would be the “star” among emerging market economies.
S&P stated in a report that global macro performance over the upcoming quarters indicates a slowdown in growth with tightening financial conditions amid central bank rate hikes. The majority of leading sentiment indicators also indicate slower growth.
According to the report, growth in emerging markets slowed down in the second quarter as a result of lower real household income due to inflation, declining business confidence, and a more complex external environment.
In raising policy rates, emerging-market central banks have done so before their counterparts in developed nations, and in Latin America, they are currently at the end of their cycles of tightening.
Core inflation in other areas is still rising, indicating that more needs to be done. The US Federal Reserve recently increased interest rates significantly, which is aggravating balance-of-payment problems in emerging markets.
India is the star of this group, with a growth of 7.3 percent this fiscal year (ending in March 2023), according to S&P. “For the 16 emerging economies that we cover, excluding China, 2022 GDP growth will hit 5.2 percent this year, in our view,” the company said.
The US-based agency claimed that as central banks aggressively raise interest rates to combat inflation, our confidence in their ability to prevent a severe downturn is eroding. It added that growth is being negatively impacted almost everywhere by rising rates, increased energy insecurity in Europe, and the lingering effects of COVID-19. “We are now expecting a mild recession in the US,” the report said.
Although the economic slowdown may have been the most anticipated in history, S&P stated that the data had not yet fully converged.