The Strategist

Fitch cuts global GDP growth forecast for the year

09/17/2021 - 09:50

International rating agency Fitch Ratings has changed its expectations for global GDP growth to 6 percent for the year from the 6.3 percent forecast in June, the agency said in its September economic outlook.

Fahad Kaizer/UN Women
Fahad Kaizer/UN Women
"The global economic recovery is proceeding rapidly... Progress in vaccination is limiting the impact of the new rise in COVID-19 infections on economic activity in Europe and the US. But the dynamics of the virus are having a greater impact on growth where vaccination rates remain low," the agency noted in a statement.

Thus, the forecast for the euro zone economy dynamics was raised to 5.2% from 5%. However, the US GDP growth forecast was lowered to 6.2% from 6.8% in the June forecast because commodity supply disruptions are limiting the pace of economic recovery, the report said.

In addition, medium-term inflationary pressures have intensified, the agency's analysts said. And while US commodity price inflation should ease next year, a gradual rise in services price inflation will prevent core inflation from falling below 3% by the end of next year, Fitch said.

The agency expects the US Federal Reserve (Fed) to start tightening its policy in November.

According to the report, inflationary pressures are less intense in other advanced economies.

The agency also expects China's GDP to grow by 8.1 percent instead of 8.4 percent in June as a slowdown in the real estate market restrained domestic demand; forecasts for several other Asian economies were also adjusted downward due to an increase in the disease and tighter lockdown restrictions, the release said.

At the same time, forecasts for Russia, Mexico, Turkey, Poland and South Africa were raised, the agency noted.