Fitch Ratings’ recent Global Economic Outlook (GEO) report anticipates a substantial decline in global growth to 2.1% in 2024, in contrast with the strong performance seen in 2023.
The report from Fitch Ratings flags the resilience observed in global growth throughout 2023, propelled by China’s consumption stabilisation and a revitalisation of growth in the United States.
However, looming challenges including China’s continuous property downturn, economic stagnation within the Eurozone, and the complete repercussions of recent monetary tightening are poised to be contributing factors to the deceleration.
“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 upwardly revised its 2023 global growth forecast to 2.9 per cent from 2.5 per cent, reflecting an increase to 2.4 percent for the US and 5.3 percent for China.
Emerging markets excluding China also received a 0.2pp boost to 3.6 per cent. Eurozone growth remains relatively subdued at 0.5 per cent.
Looking ahead to 2024, Fitch has adjusted its global growth forecast by 0.2pp, anticipating a 0.9pp increase in the US to 1.2 per cent, effectively avoiding a recession.
However, the eurozone is expected to face a 0.4pp cut to growth, settling at 0.7 per cent.
The report attributes the surprising resilience in US growth to renewed fiscal easing, consumers’ willingness to tap into excess savings and robust private-sector finances.
Despite the limited impact of monetary tightening so far, Fitch anticipates a significant slowdown in growth as household income and profits decelerate, credit and investment weaken, and real interest rates rise in the coming year.
In contrast, Europe’s economy struggles, with mild technical recessions unfolding in the eurozone and the UK.
Eurozone exports are taking a hit from falling world trade, compounded by credit tightening affecting investment.
China, which experienced a re-opening boost this year, is expected to see a growth slowdown to 4.6 per cent in 2024. Policy support has faced challenges in curbing the decline in housing sales and construction.
Inflation dynamics vary, with core inflation falling faster than anticipated, particularly in the eurozone.
Central banks, cautious about declaring victory against inflation, are expected to maintain ‘restrictive’ rates.
The Federal Reserve is predicted to raise the federal funds rate in January 2024 and subsequently cut rates by 100bp by year-end to 4.75 per cent.
The European Central Bank is projected to start easing in April, reducing rates by 75bp by year-end. In contrast, the Bank of Japan is expected to raise its policy rate, marking the first tightening since 2007.
(with inputs from ANI)
