Moody’s Investors Service has released a report stating that the global economy is expected to slow down in 2023 as various central banks implement monetary policy tightening. This tightening is predicted to have a negative impact on economic activity and employment in most major economies, resulting in a decrease in global economic growth from 2.7 per cent in 2022 to 2.0 per cent in 2023 before improving to 2.4 per cent in 2024.
Furthermore, while inflation is expected to moderate, it is uncertain whether it will decline to central bank targets. Inflation is expected to remain above central bank targets in advanced economies for most of 2023 and 2024. Central banks are expected to keep interest rates restrictive for longer than financial markets anticipate to moderate demand.
The report highlights that the end of monetary policy tightening is near, but the appropriate number of interest rate increases and how long rates will remain restrictive is uncertain. If financial conditions loosen and undermine central banks’ efforts to control aggregate demand, they may be forced to adopt even more aggressive policy tightening.
The report suggests significant risks to the global economy in the coming years, despite recent positive surprises. Central banks will need to carefully navigate monetary policy in order to balance the need for economic growth with the need to control inflation and maintain financial stability.
What is Moody’s Investors Service?
Moody’s Investors Service is a globally recognised credit rating agency that provides credit ratings, research, and risk analysis to investors, creditors, and other market participants. The agency is known for its ability to assess the creditworthiness of companies, governments, and other entities based on their ability to meet financial obligations. Investors widely use Moody’s ratings to assess the level of risk associated with an investment and make informed decisions.
Moody’s credit ratings are based on a comprehensive analysis of financial and non-financial factors, such as financial statements, economic indicators, and political risk. The agency rates debt securities, including bonds and other fixed-income investments, as well as issuers of these securities. Moody’s also provides research on credit trends, market analysis, and economic indicators to assist investors in decision-making.
The agency’s credit ratings are considered by many to be a critical measure of creditworthiness, and they have a significant impact on the global financial markets. Moody’s ratings can affect the interest rates that issuers pay on their debt, the cost of borrowing for companies and governments, and the ability of investors to obtain financing.
In addition to providing credit ratings, Moody’s also plays an important role in monitoring and assessing global economic trends and risks. Investors, policymakers, and other market participants widely read the agency’s reports on economic trends and risks. They provide valuable insights into the health of the global economy and financial markets.