New Delhi [India], December 9 : In its latest Global Economic Outlook (GEO) report, Fitch Ratings predicts a significant drop in world growth to 2.1 per cent in 2024, down from the robust performance in 2023.
According to Fitch Ratings, the report highlights the resilience of global growth in 2023, driven by the normalization of consumption in China and a resurgence in US growth.
However, looming challenges such as China's ongoing property slump, the eurozone's economic stagnation, and the full impact of recent monetary tightening are expected to contribute to the slowdown.
Fitch has revised its 2023 world growth forecast upwards to 2.9 per cent, with the US seeing an increase to 2.4 per cent and China to 5.3 per cent.
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.
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