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By Zeyad Masroor KhanJanuary 27, 2023
Moody’s on Tuesday gave a ‘negative outlook’ to credit worthiness of countries globally for 2023, saying high prices of food and energy would curb economic growth and raise social tensions.
Tighter financial conditions and economic scarring will push some debt burdens to unsustainable levels, while rising borrowing costs will erode debt affordability, according to Moody’s. It forecast that as many as 13 nations, including India, would spend over 20 per cent of their government revenue in servicing debt next year. The policy dilemma between servicing creditors and meeting populations’ demands for social and economic developments will intensify as governments dedicate a growing share of their revenue to interest payments, it added.
“Our outlook for sovereign creditworthiness in 2023 is negative. Although inflation will start declining, prices of food and energy will remain high, curbing economic growth and raising social tensions,” Moody’s said. Global GDP growth will slow to 1.7 per cent in 2023, from 3 per cent in 2022 as higher prices and tighter monetary policy hurt consumer spending, investment and economic sentiment. Asia would outperform other regions. Large Asian countries like India will grow in excess of 4.5 per cent as domestic consumption, investment and tourism return to normal.
In its Global Macro Outlook 2023-24, Moody’s had last week said global growth will slow in 2023 and remain sluggish in 2024. India’s GDP growth projection for 2022 was cut to 7 per cent from 7.7 per cent, citing global slowdown, high inflation and rising domestic interest rates. For G-20 economies, the growth is projected to decelerate to 1.3 per cent in 2023, significantly lower than its previous estimate of 2.1 per cent.
The global economy is on the verge of a downturn amid extraordinarily high levels of uncertainty due to persistent inflation, monetary policy tightening, fiscal challenges, geopolitical shifts and financial market volatility, it had said.