Fitch Increases 2023 Global Growth Outlook – Breaking News
Fitch Ratings Raises Global Growth Expectations for 2023
Credit rating agency, Fitch Ratings, has revised its growth forecast for the global economy for 2023. In its latest report, titled “Central Bank Inflation Struggle Continues,” Fitch increased the growth expectation from 2 percent to 2.4 percent.
The report highlights that despite short-term resilience in global growth, central banks may have to maintain their tightening policies if core inflation levels remain stubbornly high in the coming months.
Furthermore, the report suggests that the global growth outlook for 2024 has deteriorated due to prolonged impacts of monetary policy regulations on the economy. However, economic activities have performed better than expected this year, leading Fitch to upgrade its growth forecast for 2023 from 2 percent to 2.4 percent.
The largest revisions were observed in emerging markets, where incoming data exceeded expectations. Fitch raised the growth expectation for emerging markets excluding China from 2 percent to 2.9 percent. Notable improvements were observed in Brazil, India, Mexico, and Russia.
Regarding China, Fitch increased its growth forecast for 2023 from 5.2 percent to 5.6 percent. While the country’s recovery has slowed down in recent months, consumption continues to normalize, and macro policy is being loosened.
Turning to the United States, Fitch emphasizes that the growth forecast for this year has increased from 1 percent to 1.2 percent. Despite expectations of a slight recession caused by US Federal Reserve (Fed) policy tightening, the timing has been pushed to the last quarter of this year and the first quarter of 2024.
The report mentions no changes in the growth forecast for the Euro Zone, which stands at 0.8 percent for 2023 and 1.4 percent for 2024. It highlights the easing of the natural gas crisis in Europe but notes that the European Central Bank (ECB) has tightened its monetary policy more aggressively.
In the UK, higher interest rates are increasing the burden of household debt, leading to a recession forecast for 2023.
The report states that no interest rate reductions are expected this year in the USA and Europe. The global growth forecast for 2024 has been reduced to 2.1 percent due to persistently high core inflation levels.
The report also mentions that developed countries’ central banks are increasingly concerned about inflation and predicts two more interest rate hikes by the Fed and ECB in the coming months. The Fed is expected to raise interest rates to 5.75%, while the ECB is expected to raise them to 4.5%. The Bank of England is predicted to reach 5.25 percent, and no interest rate cuts are expected until next year.
China, in contrast, has lowered interest rates, and developing countries such as Brazil and Mexico are expected to follow suit by the end of this year.
The report attributes the growth resistance to low unemployment rates but suggests that recent monetary tightening may put pressure on US and European demand.
Additionally, the report highlights that there has been no sudden credit crisis following banking stresses in the USA. However, increased bank funding costs and credit tightening pose risks that could impact growth more than expected.
Regarding Turkey, the report notes that the recent appointment of a new finance minister and central bank governor has increased the possibility of a return to more orthodox economic policies. The promise of a “rational” and predictable Turkish economy is seen as key to achieving desired prosperity.
The Central Bank of the Republic of Turkey (CBRT) is expected to implement a significant increase in the policy interest rate at its upcoming meeting. The report predicts a policy rate of 25 percent by the end of 2023, followed by a period of unchanged interest rates next year before a rate cut in 2025.
Turkey’s growth expectation for 2023 remains at 2.5 percent, while the forecast for 2024 is maintained at 3 percent. The report predicts a growth rate of 3.8 percent for 2025.
The recent weakening of the Turkish lira is expected to boost net trade, while wage increases and increased confidence in the economy will support private consumption.
