World Economy

Fitch Forecasts Global Growth at 2.4%

Fitch Forecasts Global Growth at 2.4% Fitch Forecasts Global Growth at 2.4%

In its latest Global Economic Outlook, Fitch Ratings forecasts the global economy will grow by 2.4% in 2015, followed by 2.9% in 2016 and 2.8% in 2017.

The pick-up in 2016 reflects a recovery from recession in Brazil and Russia, albeit a weak one; while the structural slowdown in China is weighing on global growth potential, Reuters reports.

According to Fitch analysts, growth in major advanced economies (MAEs) is expected at 1.8% in 2015, 2% in 2016 and 1.8% in 2017.

Fitch's global growth forecast (which is weighted at market exchange rates) has weakened since March's GEO by 0.3% for 2015–due mainly to US revisions–and is practically unchanged for 2016.

The US Fed will start the global monetary tightening cycle with the first rate increase before the end of 2015, followed by the Bank of England. However, the pace and extent of the tightening will be subdued by historical norms.

Fitch forecasts the key US policy interest rate to average 1.1% in 2016 and 2.3% in 2017.

The ECB and the Bank of Japan will continue their QE programs. As recent bouts of market volatility highlight communication of major central banks will remain a key determinant of global financial conditions.

The baseline forecast is for eurozone GDP growth to strengthen from 0.9% in 2014 to around 1.6% in 2015-2017, but the risk of a Greek exit from the eurozone has intensified following the breakdown in talks between Greece and its creditors and the announcement of a referendum on the bailout proposals, to be held on July 5. This poses a risk to economic recovery.

BRICS Countries

Among the BRICS countries, GDP growth will range from 7.8% in India to a contraction of 3% in Russia and 1.5% in Brazil this year.

China is in a gradual structural slowdown and unchanged growth forecast is 6.8% in 2015, 6.5% in 2016 and 6% in 2017. India's GDP growth will surpass China's this year for the first time since 1999, and accelerate to 8% in 2016 and 8.1% in 2017.

Recovery from the recession in Russia and Brazil will be weak, with growth rates of only 1.5% by 2017.

Japan is forecast to return to above-trend growth of 1.2% in 2015 and 1.4% in 2016, supported by currency depreciation and higher real wages after the weakness in 2H14. However, growth will again slow in 2017 based on the assumption of consumption tax increase scheduled for April 2017.

The UK economy is at the peak of its economic growth cycle as spare capacity is gradually absorbed. The GDP growth forecast is 2.5% in 2015, 2.3% in 2016 and 2.1% in 2017.