Fitch raises global growth forecast on improved near-term prospects
Mar 14, 2024
New Delhi [India], March 14 : Fitch Ratings has raised its 2024 global GDP growth forecast by 0.3 percentage points to 2.4 per cent in its latest Global Economic Outlook (GEO), arguing that the prospects for growth world over in the near-term have improved.
This reflects a sharp upward revision to the US growth forecast to 2.1 per cent, from 1.2 per cent in the December 2023 estimates.
The revision to the US outweighs a marginal cut to its China 2024 growth forecast - to 4.5 per cent from 4.6 per cent - and a small revision to its eurozone forecast, to 0.6 per cent from 0.7 per cent.
The rating agency its latest report also revised upwardly the growth forecast for emerging markets excluding China by 0.1 percentage point to 3.2 per cent, with forecasts raised for India, Russia and Brazil.
Fitch expects world growth in 2025 to edge up to 2.5 per cent (unchanged from before) as the eurozone finally recovers on a pick-up in real wages and consumption - but US growth slows.
"And with lagged effects from last year's monetary tightening still to come through as real interest rates rise (in the US), we expect quarter-on-quarter growth to slow to a significantly below-trend rate later this year," Fitch said.
The eurozone continues to stagnate, with Germany's recession weighing on France and the rest of the bloc, it said.
"The German economy faces structural growth constraints but it has also been hit by a string of major shocks that are unlikely to be repeated. Growth should pick up in the medium term as the ECB cuts rates, world trade recovers and the impact of the energy shock fades."
"China's property collapse continues unabated - housing sales now look likely to fall sharply again this year - and evidence of deflationary pressures is rising. But fiscal easing is being stepped up materially and this has cushioned the impact on the GDP forecast."
On the monetary policy side, Fitch expects expect both the US Federal Reserve and ECB to cut rates three times, by a total of 75 basis points, by year-end.
"But both central banks want to see more evidence that recent disinflation progress is durable before starting out on the policy-easing process. We have pushed back the date of the first Fed cut to July from our previous expectation of June. We have also pushed back the date of the first ECB cut to June from April," Fitch said.
