Debt-watcher Fitch Ratings has raised its global growth forecasts for this year due to improved confidence in recovery prospects.
In its latest Global Economic Outlook released on Tuesday, June 18, Fitch said it raised its global gross domestic product (GDP) outlook to 2.6 percent from 2.4 percent in March.
In revising the forecast, Fitch cited improved confidence in European recovery prospects, a revival in China's export sector, and stronger domestic demand in emerging markets.
Meanwhile, Fitch kept its 2024 growth forecast for the US at 2.1 percent.
“The expected pivot to global monetary policy easing is now taking shape, with the ECB [European Central Bank] recently cutting rates and the US Federal Reserve and the Bank of England (BOE) both expected to follow suit in third quarter 2024,” Fitch said.
“But inflation is surprisingly persistent and we now expect global rates to decline at a shallower pace over the next 12-18 months,” it added.
Growth forecasts for the eurozone, China, and emerging markets excluding China have also been adjusted upward.
However, for 2025, world growth is forecasted to edge down to 2.4 percent as US growth slows and eurozone growth picks up.
European recovery prospects are strengthening as the terms of trade and energy shock reverse, and there is a pickup in energy-intensive industries in Germany.
In the US, the economy is slowing as last year's fiscal impulse fades, imports recover, and credit growth remains weak.
Meanwhile, domestic demand has weakened in China due to a property market collapse and anemic private consumption growth.
However, fiscal policy is being loosened, and exports have rebounded.
The global monetary policy cycle is expected to lead to gradual rate cuts, although central banks remain cautious about loosening policy too rapidly due to concerns about inflation.