Global growth to moderate in 2025; US, China to decelerate to 1.5% and 4.5%: Fitch Ratings

New Delhi [India], June 18 : Global growth for 2025 is expected to moderate at 2.4 per cent from 2.6 per cent in 2024 according to projections by ratings agency Fitch, as US economic expansion decelerates to a below-trend rate of 1.5 per cent.
The US ratings agency has projected growth of China to slow down at 4.5 per cent due to declining exports and reduced government spending.
Meanwhile, the eurozone is forecast to see an uptick in growth to 1.5 per cent next year. This upward adjustment is driven by stronger-than-expected performances in the eurozone, a revitalized Chinese economy, and robust momentum in emerging markets excluding China.
Fitch ratings further said, "Inflation is surprisingly persistent and we now expect global rates to decline at a shallower pace over the next 12-18 months."
Looking ahead to 2025, Fitch predicts a slight deceleration in China's growth to 4.5 per cent as export growth slows and fiscal support wanes.
For the 2024, Fitch has revised the outlook upwards for the eurozone significantly, with growth projections raised by 0.2 percentage points to 0.8 per cent. China's growth for 2024 is also revised upwards to 4.8 per cent from 4.5 percent earlier.
This positive adjustment reflects a reversal of earlier economic shocks, including improved terms of trade and a resurgence in energy-intensive industries in Germany.
Real wages in the eurozone are also on the rise, boosting household spending and further stabilizing the region's recovery.
In contrast, the growth outlook for the United States remains unchanged at 2.1 per cent for 2024.
The US economy is experiencing a gradual slowdown as the effects of previous fiscal stimuli wane and credit growth remains subdued. Despite these headwinds, household incomes are rising, and strong financial buffers are mitigating the risk of a sharp increase in savings.
This is attributed to weaker fiscal support and a gradual easing of monetary policy. The eurozone, growth of 1.5 per cent, will be supported by a recovery in household incomes and a rebound in industrial activity.
Fitch said, the global monetary policy landscape is undergoing significant changes as central banks shift towards easing.
The European Central Bank (ECB) has already cut rates, and the US Federal Reserve and the Bank of England (BoE) are expected to follow suit in the third quarter of 2024.
However, inflation remains stubbornly high, particularly in the services sector, which may slow the pace of rate cuts.
Fitch anticipates that global rates will decline gradually over the next 12 to 18 months, reflecting persistent inflationary pressures and cautious central bank policies.
The recovery in Europe is supported by a reversal of earlier economic shocks, particularly in energy markets, and a strengthening of household financial positions.
In the US, the economic slowdown is tempered by rising household incomes and robust financial buffers, though the effects of last year's fiscal measures are fading.
China faces a challenging outlook with weakening domestic demand and widespread deflationary pressures, despite recent improvements in exports and fiscal support.
If we compare this with India, RBI has revised India's growth for FY25 upwards at 7.2 per cent a hike of 20 basis points from its earlier prediction. In its policy review RBI Governor Shaktikanta Das cited balanced risks and robust economic performance across quarters, with GDP growth expected to remain around 7.2-7.3 per cent throughout the year.