Fitch raises global growth forecast for this year, but says 2024 will be grim
Fitch Ratings has raised its forecast for global GDP growth in 2023 to 2.4%, from the 2% it estimated in March, based on the near-term resilience in the global economy.
In its June Global Economic Outlook (GEO), released on Thursday, the ratings agency, however, noted that with monetary policy adjustments and their impact on the economy proving more protracted, the global growth outlook for 2024 has deteriorated.
It has forecast GDP growth for 2024 slipping to 2.1%, compared with its March estimate of 2.4%, to due to longer lags in the impact of higher interest rates, along with weaker base effects for emerging markets (EM) growth.
Fitch has revised up EM (excluding China) growth for 2023 to 2.9% from 2.0% with Brazil, India, Mexico and Russia seeing substantive improvements.
"We have raised China’s 2023 forecast to 5.6% from 5.2% after a swifter-than-expected reopening rebound in Q1-23. The recovery has faltered somewhat in recent months, but consumption continues to normalise and macro policy is starting to be eased."
The ratings agency raised the US growth forecast for 2023 to 1.2% from 1.0% as consumption and jobs growth remain robust.
"We still expect Fed tightening to push the economy into a mild recession, but the timing of this has been pushed out to 4Q23-1Q24. Our US growth forecast for 2024 has, accordingly, been cut to 0.5% from 0.8%."
Headline inflation has fallen, but core inflation remains stubbornly high, perpetuated by rising services inflation. Wage growth in the US and Europe far exceeds rates consistent with inflation targets as labour markets remain tight.
