Fitch Solutions has slightly upgraded its projections for global economic growth to 5.7 percent in 2021, up from 5.6 percent it expected in April, before declining sharply to 3.6 percent in 2022.
In its updated insights on the global macroeconomic outlook, released through a virtual event on Tuesday, Fitch Solutions said that developing markets will witness a 6 percent growth in their economies in 2021, before going down to 5 percent in 2022 and going below that in 2023.
Fitch Solutions also expected a slower growth in the global economy owing to lower commodity prices, the expected rising rates in the emerging markets, and supply side constraints.
It expected that developed countries will lead the way re-opening economies worldwide.
Answering Ahram Online questions on the key risks the global economy is expected to witness during the rest of 2021 and during 2022, Fitch Solutions’ global head of country risk Cedric Chehab said that they revolve around the slowdown in vaccines roll out – especially in the emerging and developing economies – the financial market volatility, the expected global political risks in 2022, and the extent of the vaccine efficiency.
“If the vaccines proved inefficient, it would push all economies worldwide to resort again to the lockdown measures, besides it would lead to a rise in infections again”, Chehab explained.
On the political risks ahead, Chehab added that they include tensions between China and the US, the US midterm elections in 2022 and the anticipated elections in Japan, Italy and Germany.
He also pointed out to risks related to a rise in global inflation, which is driven by the further rise in bond yields and the expected tightening of the Federal Reserves’ monetary policy, adding that emerging markets are expected to increase interest rates to meet the predicted rise in inflation.
Moreover, capital flows and currency performance against the US dollar witnessed an improvement in emerging markets since November 2020, according to Fitch Solutions.
Fitch Solutions is expected to release its regional economic outlook insights over the coming weeks, which include its projections for the Egyptian economy.
In April, Fitch Solutions placed Egypt among five emerging markets that are not expected to see recovery in their tourism sector in 2021 amid COVID-19 repercussions.
It also excluded Egypt from markets that are expected to see positive indices in 2021 regarding inflation, commodity prices, reforms and the vaccines' roll out.