Fitch Ratings raises 2024 global GDP forecast to 2.4% amidst mixed regional outlooks
Fitch Ratings has upgraded its 2024 global Gross Domestic Product (GDP) growth forecast, citing a 0.3 percentage point increase to 2.4% in its latest Global Economic Outlook (GEO). The adjustment is underpinned by a notable uptick in the US growth projection to 2.1%, up from 1.2% in December 2023, overshadowing marginal cuts in China’s forecast to 4.5% from 4.6%, and a slight revision for the eurozone to 0.6% from 0.7%.
The ratings agency emphasized a surge in growth expectations for emerging markets, excluding China, now pegged at 3.2%, with India, Russia, and Brazil seeing upward revisions. Despite a promising outlook, Fitch anticipates a moderation in global growth for 2025 to 2.5%, with the eurozone poised for recovery on the back of increased real wages and consumption, while US growth is expected to decelerate.
In the United States, Fitch pointed to the waning impact of fiscal stimulus and an impending slowdown in household income growth as factors contributing to a below-trend quarter-on-quarter growth rate later in the year. Conversely, the eurozone grapples with stagnation exacerbated by Germany’s recession, though hopes for a rebound persist as the European Central Bank eyes rate cuts amidst receding energy shocks.
Meanwhile, China faces continued challenges with a persistent property market downturn and mounting deflationary pressures. Yet, fiscal stimulus measures offer a reprieve, softening the blow on GDP forecasts.
On the inflation front, Fitch revised its end-2024 US CPI inflation forecast upwards to 2.9%, reflecting increased momentum in core inflation. In the eurozone, despite progress in curbing inflation, concerns linger over persistently high services and wage inflation, coupled with burgeoning shipping costs adding pressure on core goods inflation.
Monetary policy expectations remain cautious, with Fitch anticipating rate cuts from both the US Federal Reserve and the European Central Bank. However, the central banks are hesitant, awaiting further evidence of sustained disinflation progress before committing to easing measures. The first rate cut from the Fed is now expected in July, while the ECB is projected to act in June 2024, marking a delay from previous expectations.
Overall, Fitch’s nuanced outlook underscores a complex global economic landscape characterized by varying growth trajectories across regions, inflationary pressures, and a measured approach to monetary policy adjustments amidst lingering uncertainties.
