Fitch boosts growth, inflation forecasts

Fitch boosts growth, inflation forecasts
# 16 June 2021 10:50 (UTC +04:00)

The global economic recovery is continuing to outpace expectations and drive prices higher, but Fitch Ratings still sees inflation as temporary, APA-Economics reports citing the Agency.

The rating agency boosted its global economic forecast by 0.2 percentage points to 6.3% for 2021, citing a faster reopening of the services sector in the U.S. and Europe and continued fiscal policy support as key drivers of the stronger outlook.

“We have raised our 2021 growth forecasts for most developed economies, with the U.S. revised up to 6.8% from 6.2%, the eurozone to 5.0% from 4.7%, and the UK to 6.6% from 5.0%,” Fitch said, noting that Japan is the only major economy to see a downward revision (to 2.5% from 3.6% in the previous outlook).

Fitch’s forecast for China is unchanged at 8.4%, but its call for other emerging markets has been trimmed to 5.9% from 6.0% due to lower forecasts for India, Indonesia and Turkey — although this was partly offset by upward revisions for Brazil, Mexico, South Africa and Korea.

Against the backdrop of a faster recovery, inflation is heading higher, but Fitch expects that to be temporary as growth eases in 2022.

“Slower growth, supply adjustments in bottleneck sectors, a switch back towards services consumption, and fading impacts from U.S. fiscal stimulus should see the rate of inflation decline in 2022,” Fitch said, noting that it expects global growth to slow to 4.3% next year.

Fitch expects U.S. consumer inflation to hit 4.1% by the end of 2021, dropping to 2.2% by the end of 2022, before ticking up again to 2.5% in 2023 “as output moves further above potential after the labour market fully recovers in late-2022.”

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