Fitch forecasts continued pick-up in global economic growth through 2018
The recovery in global growth is strengthening and is expected to pick up to 2.9 per cent this year and peak at 3.1 per cent in 2018, the highest rate since 2010, Fitch Ratings says in its latest “Global Economic Outlook” (GEO).
“Faster growth this year reflects a synchronised improvement across both advanced and emerging market economies. Macro policies and tightening labour markets are supporting demand growth in advanced countries, while the turnaround in China’s housing market since 2015 and the recovery in commodity prices from early 2016 has fuelled a rebound in emerging market demand,” said Brian Coulton, Fitch’s chief economist.
The biggest positive forecast revision since Fitch’s March GEO is to the euro zone. Here, stronger incoming data, improving external demand and greater confidence that European Central Bank (ECB) quantitative easing (QE) is gaining traction on activity have resulted in an upward revision of 0.3 percentage points to the 2017 euro-zone growth forecast, taking it to 2 per cent.
The recent pick-up in world trade growth has also been striking, Fitch says in its report.
However, this improving global picture implies an evolving monetary policy outlook, it warns.
China has recently seen a tightening in credit conditions, which will start to have an impact on growth later this year, and the US Federal Reserve looks set to pursue a normalisation course at a rate of three or four hikes per year through 2019.
Low core inflation allows the ECB to carry on with QE for the time being, but the reduction in deflation risks will see the programme phased out by mid-2018.
“With the Fed now signalling that QE [in the US] will start to be unwound later this year, these monetary policy adjustments could spark some volatility in global financial markets attuned to persistent monetary accommodation,” Coulton said.
