Moody’s Investors Service has revised down its growth forecasts for the advanced and emerging nations in the G-20, citing an unfavorable external environment and lower domestic demand.
In its latest Global Macro-Risk Outlook 2012-2013 update, Moody’s cut its forecasts for growth in emerging economies to 5.2% in 2012, compared to an earlier prediction of 5.8% growth. For 2013, it expects 5.7%, compared to April’s forecast of 6%.
However Moody’s left untouched its forecast for G-20 developed countries: they will see growth of 1.4% in 2012 and 2% in 2013.
“We continue to expect that the slowdown in advanced economies and volatile capital flows will suppress growth in emerging markets,” said Elena Duggar, Moody’s group credit officer for sovereign risk.
Moody’s stressed the key risks to global growth is the deeper than expected recession in the Eurozone. The agency also warned of “the risk of a hard landing in major emerging market economies, including China, India and Brazil,” followed by “an oil-price supply-side shock resulting from resurfacing geopolitical risks, as well as the risk of sudden and sharp fiscal tightening in the US in 2013, given the recent political gridlock”.