Fitch Ratings has raised its forecasts for world growth in 2024 in its latest global economic outlook as confidence in European recovery prospects improve, China’s export sector revives and domestic demand in emerging markets excluding China shows stronger momentum.
The US is slowing but only gradually and our 2024 growth forecast is unchanged at 2.1 percent.
The expected pivot to global monetary policy easing is now taking shape, with the ECB recently cutting rates and the US Federal Reserve and the Bank of England (BOE) both expected to follow suit in the third quarter of 2024. “But inflation is surprisingly persistent and we now expect global rates to decline at a shallower pace over the next 12 to 18 months,” Fitch said.
“We have raised our forecast for world growth in 2024 to 2.6 percent from 2.4 percent in the March 2024 global economic outlook,” it said.
European recovery prospects are on a firmer footing as the terms-of-trade and energy shock reverses, energy-intensive industries start to pick up in Germany and real wages rebound. Stronger real incomes will boost spending by households with robust financial buffers, while the drag from earlier ECB tightening diminishes, it said.
The US economy is slowing as last year’s outsized fiscal impulse fades, imports recover and credit growth remains weak. But household-sector labor income continues to grow at a decent clip and robust household finances do not point to a sudden jump in the saving ratio, it said.
“The global monetary policy cycle is entering a new phase, in which rates will be falling slowly but to levels that will still be restricting demand. We expect the ECB to cut rates twice more this year, and the Fed to start cutting rates in September with another cut in December. This is later than we had expected, reflecting stalled disinflation momentum in the first four months of the year. But US wage growth is gradually cooling,” Fitch said.
