The Fitch Ratings agency revised the global economic growth forecast by 0.3 percentage points to 2.4% on Wednesday and has also raised the expectation for Türkiye's gross domestic product (GDP) expansion as near-term world growth prospects improve.
Fitch, one of three leading credit rating providers, stated in its "Global Economic Outlook – March 2024" report that while growth prospects improve, inflation is also showing signs of persistence, citing the recent pick-up in U.S. core inflation momentum.
Meanwhile, the increase in the global GDP outlook reflects a revision to the U.S. growth forecast to 2.1%, up from 1.2% in December, Fitch said. The agency also said China's growth forecast was slightly reduced to 4.5% from 4.6%.
The revision to the U.S. outweighs a marginal cut to China's 2024 growth forecast and a small revision to the eurozone forecast, to 0.6% from 0.7%, according to the agency.
The U.S.-based Fitch also said it had revised the growth forecast for emerging markets (EM), excluding China, by 0.1 percentage points to 3.2%, with forecasts for India, Russia and Brazil being raised.
Fitch expects world growth in 2025 to edge up to 2.5%, unchanged from before, as the eurozone finally recovers on a pick-up in real wages and consumption, but U.S. growth slows.
The credit rating agency also cited "an unprecedented pro-cyclical widening" in the U.S. fiscal deficit in 2023 as a contributor to boosting domestic demand, stating it has helped explain the surprising resilience of GDP growth.
However, they expected this impulse to fade this year and household income growth to slow, which along with lagged effects from last year's monetary tightening would contribute to a quarter-over-quarter growth slowdown.
Fitch said in its report that the eurozone continues to stagnate, with Germany's recession weighing on France and the rest of the bloc.
Regarding China's outlook, the rating agency said property collapse continues unabated in the world's second-largest economy. Housing sales are now looking likely to fall sharply again this year, and evidence of deflationary pressures is rising. However, fiscal easing is being stepped up materially, which has cushioned the impact on the GDP forecast.
The report stated that U.S. core inflation momentum has recently picked up, and the agency raised its end-2024 U.S. CPI inflation forecast by 0.3 percentage points to 2.9%.
"Better progress has been made in reducing core inflation in the eurozone but, as in the U.S., services and wage inflation remain uncomfortably high from the perspective of achieving the inflation target," the report stated.
"The jump in shipping costs is adding upside risks to core goods inflation," it added.
The report, however, indicated they expect both the U.S. Federal Reserve (Fed) and ECB to cut rates three times, by a total of 75 basis points, by year-end.
Turkish economy growth
The report, which also includes evaluations of the Turkish economy, stated that the country's economy grew by 1% on a quarterly basis in the final quarter of last year, which was above expectations, and that the increase in private consumption was effective in this.
The report noted that the economic momentum is expected to continue in the first quarter of this year, considering the latest developments in the PMI index, consumer confidence and other high-frequency indicators.
It also indicated that short-term economic gains indicate that growth would be higher this year, and the growth forecast of the Turkish economy for this year was increased from 2.5% to 2.8%.
The report noted that the Turkish economy is estimated to expand by 3.1% in 2025.