Moody’s lowers US and European economic growth forecasts

In the latest research reports published on Tuesday, Moody’s Investors Service slashes the GDP growth forecasts for the US and Europe for 2022 as well as 2023.

Key quotes

“Now expects US real GDP growth of 2.1% in 2022 and 1.3% in 2023, down from its May forecasts of 2.8% and 2.3%, respectively.”

“Tighter monetary and financial conditions to reduce stubbornly high inflation will slow economic growth.”

“While Moody's expects inflation to trend down as growth weakens, it will still remain elevated, dropping from 9.1% in June to 7.0% by the end of 2022 and to 2.3% by the end of 2023.

“Moody's baseline forecast for the euro area is for real GDP to grow 2.2% in 2022, followed by 0.9% in 2023, down from its May forecasts of 2.5% and 2.3%, respectively.”

"Our baseline forecasts assume that persistently high energy prices and broad-based inflation will continue to squeeze real incomes and dampen consumption spending as the energy crisis drags on.”

“The main factors driving the lower growth projections are: gas supply interruptions and uncertainty that will require adjustment on the demand side; high inflation, which is denting consumer spending; withdrawal of monetary policy support by the European Central Bank (ECB); tighter global liquidity; and subdued external demand.”

“There are substantial downside risks to Moody's forecasts should Russia completely shut off gas flows to Europe.”

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