Daily Management Review

Fitch improves global economy forecasts, expects steady recovery


Coronavirus vaccination will significantly improve the situation with the pandemic by mid-2021, after which economic recovery will be more confident and social distance standards are likely to be lifted in 2022, according to an updated macro forecast from Fitch.

In the third quarter of 2020, the acceleration of growth was more significant than expected. However, due to new restrictions, the recovery was not sustained at the end of the year. At that, the global outlook for 2020 has improved from minus 4.4 per cent to minus 3.7 per cent (by comparison, world GDP fell by 2.1 per cent in the crisis year 2009). The growth forecast for the following year has been improved from 5.2% to 5.3%, and for 2022 it has been improved from 3.6% to 4%.

Despite accelerating growth, total GDP in 2022 will still be 2.5% lower than it would have been without the pandemic. The US GDP and the euro zone GDP will recover to pre-crisis levels earlier than expected - by the third quarter of 2021 and the second quarter of 2022 respectively. But possible vaccination problems are a key risk, the agency notes (the forecast assumes that one or more vaccines will appear in the US and EU markets by the end of this year or at the very beginning of the next year). In the USA, the decline this year will be 3.5%, next year it is expected to grow by 4.5% and in 2022 - by 3.5%.

The euro zone economy will shrink by 7.6% this year, although a 9% decline was expected as early as September. In the fourth quarter, however, there will be another 3.6% decline, according to Fitch. In 2021, the euro zone will grow by 4.7 per cent (the prolonged lockdown has lowered the forecast from the previous 5.5 per cent), in 2022 - by 4.4 per cent (plus 1.2 points).

China will grow by 2.3% this year and next year; against a backdrop of a recovery of 8% in consumer demand, growth will slow to 5.5% in 2022. Meanwhile, the country's GDP is already 3% higher than before the pandemic. In developing countries as a whole, the downturn will be much less pronounced this year - minus 1%, while in developed countries it will be minus 5.4%. Excluding China, the decline will be 4.7% from the previous 5.7% - an improvement in the outlook is due to higher forecasts for Russia, Brazil, Mexico and Turkey.

source: reuters.com