Moody's cuts G20 growth forecast


In a quarterly report released on Tuesday, Moody's said global economic growth will be muted over the next two years. Growth forecasts for 2015-16 remain below the G20's average growth rate before the 2008 financial crisis at 2.7 percent this year, and will rise to around 3 percent in 2016, compared to 2.9 percent in 2014. Additionally, Moody's does not expect economic growth in the G20 to return to pre-crisis levels within the next five years.

The author of the report - Credit Policy Senior Vice President Marie Diron - said: "The recovery in the U.S., and to a lesser extent, the euro area and Japan, will be offset by the ongoing slowdown in China, low or negative growth in Latin America and only a gradual Russian recovery from its recession this year. A sharp or long-lasting correction in asset prices in China is one of the risk factors which could result in lower G20 growth than in our baseline forecasts."

Possibilities of further marked corrections in Chinese equity and property prices, disorderly responses to the U.S. Federal Reserve's (Fed) anticipated policy tightening and a Greek exit from the euro area are the main downside risks to Moody's Global Macro Outlook over the next two years.

Moody's maintains its baseline Chinese gross domestic product (GDP) growth forecast of 6.8 percent this year and 6.5 percent in 2016, before it will start dropping toward 6 percent by the end of the decade.

Moody's U.S. growth forecast is 2.4 percent for 2015 and 2.8 percent for 2016. Robust job creation, high corporate profits, favorable financing conditions and pent-up demand will all lead to higher GDP growth, the report said.

"Moody's eurozone growth forecast is 1.5 percent for both 2015 and 2016. The weaker euro and lower oil prices have given a boost to the region's economy," the Moody's report highlighted, and added: "However, there is no evidence from ... increased investment, labor productivity or faster than usual employment growth that structural reforms have markedly lifted the region's growth potential yet."

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