Global credit rating agency Fitch Ratings has revised downward growth forecasts for the world economy in its latest “Global Economic Outlook” (GEO), but says there is no global recession yet.
Fitch Ratings said overall global growth is expected to remain at 2.5% in 2016, the same as 2015 but a downward revision of 0.4 percentage points from its earlier predictions.
The global credit rating agency forecasts growth in advanced countries as a whole at 1.7% this year, down from 2.1% in December’s edition of the GEO. For emerging markets, 2016 growth is now pegged at 4%, down from 4.4%.
Despite the significant downward changes, the growth outlook is still “considerably above global recession territory,” said Fitch.
“The investment slowdown in China and sharp expenditure compression in major commodity producing countries continue to reverberate around the world economy,” said Brian Coulton, chief economist at Fitch.
“With emerging markets at the epicentre of these shocks and now accounting for 40% of world GDP it is legitimate to ask whether the world will see, for more or less the first time in recent history, an emerging market led global recession. However, we believe several factors mitigate this risk,” Coulton added.
These factors include relatively robust labor market conditions in many of the major advanced economies and the benefits of lower oil prices on real incomes, which should “help support consumer spending in rich countries and cushion the shock.”
Furthermore, the impact of fiscal policy on growth in the advanced economies is currently less restrictive than it has been in the last few years.
With emerging markets, the larger market economies of India, Poland, Turkey, and South Korea are all large net commodity importers and stand to benefit in real income terms from the fall in commodity prices, as does China.
Finally, on China itself, despite the considerable challenges it faces, there look to be sufficient policy levers available and enough diversity in growth drivers to avoid a hard landing in 2016, said Fitch.
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