The weakness of the recovery from the financial crisis that started in 2007, as well as the current global downturn, prompted Moody’s rating agency to revise down its growth forecasts for economies in the G20.
The pace of the global recovery will remain weak at least until 2014, with fiscal consolidation and volatility in financial markets continuing to affect business and consumer confidence, while increased uncertainty “hampers spending, hiring and investment decisions,” Moody’s said in a report released on Monday.
“Overall, we expect real GDP growth in the G20 advanced economies of around 1.3% in 2012, followed by 1.6% in 2013 and 2.0% in 2014. For 2013, that is around 0.5 percentage points weaker than in our August forecast update,” it said.
Emerging economies will continue to outpace other countries in the G20 but their growth prospects have also moderated because of the slowdown in world trade and “the lack of significant new impetus from domestic demand,” Moody’s said.
It added that overall real GDP growth for emerging economies in the G20 was expected to be a little over 5% this year, slightly weaker than its forecast in August; growth is expected to pick up gradually to around 5.5% next year and 5.7% in 2014.
The agency maintained its forecast for “relatively healthy” growth in the US, while the eurozone is expected to stagnate next year. The risks to these estimates are to the downside and they are the same as in the previous report in August.
They are: a deeper than currently expected recession in the eurozone, excessive fiscal tightening in the US next year caused by the “fiscal cliff”, hard landing in major emerging markets, including China, India and Brazil and an oil price supply-side shock because of resurfacing geopolitical risks.