China’s Credit Outlook Downgraded by Moody’s
Moody’s Investors Service, one of the world’s leading credit rating agencies, has lowered China’s credit outlook from stable to negative, citing the country’s surging debt burden and the government’s ability to enact reforms. The downgrade comes just days before the Chinese leaders gather to approve a five-year plan for the economy, which is expected to focus on boosting domestic consumption and innovation, while reducing reliance on exports and investment.
Moody’s said that China’s debt-to-GDP ratio, which measures the total amount of debt in the economy relative to its output, has risen to about 280% in 2023, up from 254% in 2019. This is higher than the median of 73% for countries with a similar sovereign rating of A1. The agency also warned that China’s fiscal strength has weakened, as the government has increased spending to support the economy amid the COVID-19 pandemic and the trade war with the U.S.
Moody’s said that it expects China’s economic growth to slow to 5.3% in 2023, down from 8.1% in 2022, as the authorities tighten monetary and fiscal policies to contain inflation and financial risks. The agency also said that it sees a low probability of a hard landing or a systemic crisis in China, but noted that the challenges of deleveraging and rebalancing the economy are complex and could pose social and political risks.
UK’s Grocery Inflation Slows Down but Remains High
The UK’s grocery inflation, which measures the change in the prices of food and household items, has slowed down slightly in April, but remains at a high level, according to data from Kantar, a market research firm. Kantar reported that grocery prices have risen by 17.3% over the last 12 months, a slight slowdown from the 18.1% increase in March. However, this is still the highest annual inflation rate since Kantar started tracking the data in 2006.
Kantar said that the main drivers of grocery inflation are the rising costs of raw materials, transportation, labor, and energy, which have been exacerbated by the supply chain disruptions caused by the COVID-19 pandemic and the Brexit transition. The firm also said that some categories, such as meat, fish, dairy, and fresh produce, have seen higher price increases than others, due to their higher exposure to these factors.
Kantar said that the UK’s grocery market has grown by 3.6% in the 12 weeks to April 18, compared to the same period last year, as consumers have increased their spending on food and drink at home, amid the lockdown restrictions and the closure of restaurants and pubs. The firm also said that online grocery sales have surged by 75.2% in the same period, reaching a record share of 15.4% of the total market.
Global Economic Outlook: No Easy Way Out
The global economic outlook for 2023 is clouded by uncertainties and downside risks, according to a report by S&P Global Ratings, another credit rating agency. The report said that the global economy is facing three major challenges: the COVID-19 pandemic and its variants, the inflationary pressures and the policy responses, and the geopolitical tensions and conflicts.
The report said that the COVID-19 pandemic is still not under control, despite the progress in vaccination and treatment. The report said that the emergence of new variants, such as the Omicron strain, could pose a threat to the global health and economic recovery, especially in the emerging markets and low-income countries, where the vaccination rates are low and the health systems are weak.
The report also said that the inflationary pressures, which have been driven by the supply and demand imbalances, the commodity price shocks, and the fiscal and monetary stimulus, have forced the major central banks to tighten their monetary policies, by raising interest rates and reducing their asset purchases. The report said that this could lead to a slowdown in the global economic growth, as well as a rise in the borrowing costs and the default rates for the corporate and sovereign borrowers.
The report also said that the geopolitical tensions and conflicts, such as the war between Russia and Ukraine, the strained relationship between China and the U.S., and the instability in the Middle East and Africa, could have a negative impact on the global trade, energy, and security. The report said that these factors could also increase the volatility and uncertainty in the global financial markets, and reduce the confidence and the cooperation among the countries.
The report said that the global economic growth is expected to moderate to 3.6% in 2023, down from 5.9% in 2022, as the shocks reverberate across the economies and markets. The report also said that the global credit conditions are expected to worsen in the first half of the year, before stabilizing in the second half, assuming that the central banks succeed in trimming inflation and that the geopolitical risks do not escalate further.
