Daily Management Review

Fitch updates global economic outlook: Growth will compensate for decline


The updated global macro forecast of the Fitch rating agency suggests that already in 2021, global growth will generally compensate for the current decline due to the COVID-19 epidemic. However, despite the improvement in general estimates against the background of a faster economic recovery from the crisis, the GDP of the USA and other countries in 2021 will not completely overcome the consequences of the recession - only China can count on this. On the other hand, estimates of the dynamics of Europe and developing countries are worsened due to the revision of the data on the recession in the second quarter.

Global GDP will contract by 4.4% in 2020, follows from the updated macro forecast by Fitch: it is improved compared to the previous June estimate (minus 4.6%). "The pace of economic recovery after the record recession in March and April turned out to be higher than expected, although they will slow down in the near future," the agency notes. Nevertheless, in 2021, Fitch analysts now expect global growth of 5.2%, that is, the coronavirus downturn will be offset by the global economy by the end of next year. However, the previous level of GDP will not be reached in the United States until the end of next year, in the euro area - until the end of 2022 (and this is provided there are no new nationwide quarantines).

In the positive direction, the forecast for the United States was adjusted the most, from minus 5.6% to minus 4.6% (4% growth is expected in 2021), and for China, where the estimate was improved from 1.2% to 2 , 7% (next year growth is expected to accelerate to 7.7%), according to the results of the second quarter, the growth of the PRC's economy in annual terms has already amounted to 3.2%. 

For the euro area, the estimate was reduced from minus 8% to minus 9% (the decline in the second quarter turned out to be stronger - minus 12.1%), in the UK - from minus 9% to minus 11.5% (an increase of 5.5% in 2021). Consumption in France and the UK is now above February levels, but Europe faces the impact of rising unemployment rates (as employment support programs end), companies are cutting capex, and transport and tourism, which in the US and Europe account for 8-10% of GDP, remain in deep depression.

At the same time, the forecast provides that the EU and the UK will switch to trade terms within the WTO early next year (instead of full-fledged duty-free trade).

For all developing countries, excluding China, the forecast is also worsened: from minus 4.7% to minus 5.7% (this is primarily due to the sharp decrease in the forecast for India from minus 5% to minus 10.5%). According to the results of the second quarter, the global GDP sank by 8.9%, and in many countries - by more than 20% (including India, Great Britain and Spain). In general, in the first half of 2020, the decline was 10%, according to Fitch.

source: fitchrating.com