December 11, 2023 (MLN): World growth has held up well in 2023, but with the full impact of recent monetary tightening still to be felt, China’s ongoing property slump, and the eurozone economy stagnating, world growth is expected to fall sharply to 2.1% in 2024, Fitch Ratings says in its latest Global Economic Outlook (GEO) report.
Fitch has revised its 2023 world growth forecast to 2.9% from 2.5% in the September GEO, with the US raised by 0.4pp to 2.4% and China by 0.5pp to 5.3%.
The credit rating agency has also raised growth in emerging markets excluding China by 0.2pp to 3.6%. Eurozone growth is forecast at 0.5%, little changed from the previous forecast.
Fitch has revised up its forecast for global growth in 2024 by 0.2pp, with a 0.9pp increase in the US to 1.2% (with the recession now avoided) outweighing a 0.4pp cut to eurozone growth to 0.7%.
Recent surprising US growth resilience reflects renewed fiscal easing, consumers’ willingness to continue drawing on excess savings, and robust private-sector finances.
The impact of monetary tightening through the ‘cash flow’ channel of rising debt-service costs for private-sector borrowers has been limited so far.
Growth will slow sharply next year as household income and profits decelerate, credit and investment weaken and real interest rates rise, but is now expected to remain positive through 2024.
Europe’s economy has hardly grown this year and mild technical recessions are currently unfolding in the eurozone and the UK.
The terms-of-trade shock has eased, but falling world trade is now hitting eurozone exports while credit tightening is weighing on investment, as bank lending to companies declines.
Rising real wages should boost consumption next year but recovery will be shallow.
This year’s re-opening boost in China will not be repeated and growth is forecast to slow to 4.6% in 2024.
Policy support has been stepped up since August but this has gained little traction so far in stemming the collapse in housing sales and construction. Doubts about the efficacy of policy easing impart downside risks to growth.
Core inflation has fallen slightly faster than anticipated, particularly in the eurozone. Core goods prices have stabilized globally as supply-chain pressures have eased.
Services inflation and nominal wage growth have also fallen significantly in the eurozone but less so in the US and the UK, where they remain high.
Copyright Mettis Link News
Posted on:2023-12-11T10:04:10+05:00
42016
