World Growth Outlook improves – Fitch

Fitch Ratings: Near-term world growth prospects have improved and Fitch Ratings has raised its 2024 global GDP growth forecast by 0.3pp to 2.4% in its latest Global Economic Outlook (GEO) published yesterday.

This reflects a sharp upward revision to the US growth forecast to 2.1%, from 1.2% in the December 2023 GEO. The revision to the US outweighs a marginal cut to our China 2024 growth forecast – to 4.5% from 4.6% – and a small revision to our eurozone forecast, to 0.6% from 0.7%. We have revised up our growth forecast for emerging markets excluding China by 0.1pp to 3.2%, with forecasts raised for India, Russia and Brazil.

Fitch expects world growth in 2025 to edge up to 2.5% (unchanged from before) as the eurozone finally recovers on a pick-up in real wages and consumption – but US growth slows.

An unprecedented pro-cyclical widening in the US fiscal deficit in 2023 boosted domestic demand and helped explain the surprising resilience of GDP growth. But we expect the fiscal impulse to fade this year and household income growth to slow. The eurozone continues to stagnate, with Germany’s recession weighing on France and the rest of the bloc.

China’s property collapse continues unabated – housing sales now look likely to fall sharply again this year – and evidence of deflationary pressures is rising.

“We expect both the US Federal Reserve and ECB to cut rates three times, by a total of 75bp, by year-end. But both central banks want to see more evidence that recent disinflation progress is durable before starting out on the policy-easing process.”

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