Global rating agency S&P said on Tuesday that while the US and the eurozone are headed for a recession, India is unlikely to suffer the consequences, given the “not-so-coupled” nature of its economy to the global economy.
“The Indian economy is much decoupled from the global economy than we normally think given the high domestic demand, even though you (India) are a net energy importer. But on the one hand, you have enough forex reserves and your companies have managed to maintain a healthy balance sheet,” Paul F Gruenwald, chief economist and chief executive of S&P, told reporters here.
In fact, India was never fully linked to the global economy and so is relatively independent of world markets, he said, adding that much depends on how global money flows behave when there is a recession in the US and Europe. Their inflation rates continue to evade the monetary actions of their central banks, as the gap between the US core inflation target and the actual number is three times larger at 6 percent.
He cited inflation and the resulting US Fed measures as the
biggest threat to the US economy, he said, the world’s largest
economy is heading for a recession, which is the result of an
overheated economy because even after inflation has peak of four
decades, the unemployment rate is so low at 3.7 percent.
“Our house believes that the probability of a recession in the US is 50-50 as the output gap is still positive, but consumer and business sentiment is negative. Whether this will be a soft landing or not, it will be known later this year or early next year as the impact of the massive rate hikes by the US Fed will be known only then,” Gruenwald added.
As for the eurozone, the director said the problem is more entrenched and structural. It will take time to recover, as the crisis is a result of geopolitical problems (Russia-Ukraine war), skyrocketing energy prices after EU countries began reducing their dependence on gas from Russia since February. But again, unemployment rates in the EU are low at 6.5 percent.
The continent will face the crisis as unemployment rises, Gruenwald said, adding that the house image has less than a 50 percent chance of a eurozone recession, saddled by the war between Russia and Ukraine and the ensuing crisis. energy security issues. It will take a few years to recover if it enters a recession, unlike the US, which may recover much faster.
The recession in the US and Europe depends on central banks ignoring the slowdown and choosing to fight inflation instead.