Fitch expects global growth to pick up over the next two years
Global growth will pick up in 2015 and 2016, according to Fitch Ratings’ latest global economic outlook (GEO).
According to the global rating agency, the contribution of major advanced economies to global expansion is set to increase over the next 18 months, while growth will remain stagnant in emerging markets.
The latest forecasts for world gross domestic product (GDP) growth are 2.6% in 2014, increasing to 3% in 2015 and of a further 10 basis points in 2016, though the estimates for 2014 and 2015 are both 0.1% lower than initially forecasted in June.
Fitch said it expected the US economy to maintain its GDP growth, rising from 2.2% this year to 3.1% in 2015 and to 3% in 2016, with investment likely to be supported by profitability, low financing costs and rising confidence.
The rating agency added it expects Eurozone growth to rise from 0.9% this year to 1.3% over the next 12 months and to 1.5% in 2016.
The forecast means June’s initial estimates have revised downward, mainly because output stagnated in the second quarter, largely as a consequence of sharp slowdown in the German economy.
Fitch, however, said the recovery in the UK and in the US, the depreciation of the euro and looser European Central Bank’s policies would support the Eurozone economies, which will nevertheless remain plagued by high unemployment.
The rate of jobless people in Europe is expected to remain above 11% until 2016, while inflation in the Eurozone is expected to rise from 0.5% this year to 1% in 2015 and 1.3% in 2016.
According to Fitch’s GEO, the “current low inflation, weak demand, a decline in market inflation expectations, policy challenges and the potential for self-reinforcing dynamics make deflation a meaningful and rising risk”.
In the UK, growth will slow fall by half a percentage point to 2.5% next year before a further decline to 2.3% 12 months later, according to Fitch’s estimates, though the rating agency expects nominal wage growth to pick up as the labour market slack is absorbed and the currently weak productivity growth will improve.
Growth in the US is due to suffer a sharp slowdown from the second half of 2015, with the economy running risk of stagnation in 2016, Fitch added, pointing out that Russia and Brazil are likely to remain on the brink of recession in 2015 and 2016, while India would slow sharply.