<\/p>\n
Fitch sees shallower slowdown, boosts GDP forecasts as trade tensions ease.<\/p>\n
Global economic growth will still slowly sharply over the next couple of years, but with the U.S. backing down on certain tariffs, the outlook is a bit brighter, Fitch Ratings says.<\/p>\n
In its latest forecast, the rating agency revised its call for world GDP growth to 2.2% for both this year and next \u2014 upward revisions of 0.3 and 0.2 percentage points, respectively.<\/p>\n
Fitch said that the revisions reflect \u201cthe recent de-escalation\u201d in trade tensions between the U.S. and China.<\/p>\n
As a result, it also raised the outlook for U.S. growth to 1.5% for 2025, up from its previous forecast of 1.2%, noting that recession risks are receding.<\/p>\n
For China, the forecast for this year has also been revised up to 4.2% from 3.9%.<\/p>\n
Despite the brighter forecasts, Fitch noted that \u201cthe world economy still faces a sharp slowdown induced by the most severe trade war since the 1930s.\u201d<\/p>\n
Indeed, world GDP growth came in at 2.9% in 2024, and the longer-term average is 2.7%, it noted.<\/p>\n
Already, higher tariffs have \u201creduced U.S. business and consumer confidence,\u201d it noted. And U.S. consumption is expected to decline in the second half of 2025, amid signs of an underlying slowdown in domestic demand.<\/p>\n
Additionally, financial market volatility has risen, the U.S. dollar is weaker and long-term U.S. government bond yields are higher too, Fitch noted.<\/p>\n
Against this backdrop, the U.S. Federal Reserve \u201cis likely to be cautious about cutting rates,\u201d Fitch said. It still expects just a single rate cut this year, and not until the fourth quarter.<\/p>\n
\u201cTariffs will push up inflation, labour force growth is slowing sharply, and some inflation expectation measures remain high,\u201d it said \u2014adding that the recent increase in the volatility of oil prices poses an inflation risk too.<\/p>\n
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