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Fitch Ratings Raises 2024 World Growth Forecasts Amid Improving Recovery Prospects

Fitch Ratings has revised its forecasts for global growth in 2024 upwards in its latest Global Economic Outlook. Confidence in European recovery prospects has improved, China’s export sector has revived, and domestic demand in emerging markets excluding China (EM excl. China) shows stronger momentum. The US economy is slowing gradually, with Fitch maintaining its 2024 growth forecast at 2.1%.

The anticipated shift towards global monetary policy easing is underway, highlighted by recent rate cuts by the ECB, with the US Federal Reserve and the Bank of England expected to follow suit in the third quarter of 2024. However, persistent inflation has led Fitch to expect a shallower decline in global rates over the next 12-18 months.

Fitch has upgraded its forecast for world growth in 2024 to 2.6% from 2.4% in March 2024. Eurozone growth has been revised up by 0.2 percentage points to 0.8%, China’s growth to 4.8% from 4.5%, and EM excl. China growth by 0.5 percentage points to 3.7%. Looking ahead to 2025, Fitch forecasts a slight moderation in global growth to 2.4%, driven by slower US growth at 1.5% and a pickup in eurozone growth to 1.5%. China’s growth is expected to decline to 4.5% next year.

European recovery prospects have strengthened, supported by improving terms-of-trade and energy shocks reversing, alongside a resurgence in energy-intensive industries in Germany and rising real wages. Household spending is expected to rise with stronger real incomes, aided by robust financial buffers and reduced drag from previous ECB tightening measures.

In the US, economic slowdown is attributed to the fading impact of last year’s fiscal stimulus, recovering imports, and tepid credit growth. Despite this, steady growth in household labor income and healthy household finances suggest no sudden increase in the saving rate.

Meanwhile, China faces weakened domestic demand due to ongoing challenges in the property market and sluggish private consumption growth. Fiscal loosening and rebounding exports are expected to support real GDP, although deflationary pressures remain widespread.

As global monetary policy enters a new phase of gradual rate reductions, Fitch anticipates further rate cuts by the ECB and expects the Fed to commence rate cuts in September, followed by another in December. This cautious approach reflects concerns over persistent services inflation driven by rising labor costs, housing rents, and normalization of price trends.

For more details, the “Global Economic Outlook – June 2024” report is available here

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