Global growth to remain strong in 2018: Fitch Ratings

By Gokhan Kurtaran

LONDON(AA) - The global growth momentum remains strong and is likely to be sustained by a positive outlook for investment, said Fitch Ratings on Monday.

The global growth rate is now estimated at 3.2% this year and indications are that 2018 will be equally robust with growth to edge up to 3.3% next year, according to the credit rating agency's latest Global Economic Outlook (GEO) report.

"The lack of global inflation in the face of positive growth surprises is allowing exceptionally accommodative global monetary policy settings to co-exist with strong growth out-turns and prospects.

"However, caution is warranted on how long this combination can persist. Beyond 2018, it seems highly likely that global growth will be moderate, while monetary policy conditions will tighten," said Brian Coulton, Fitch's Chief Economist.

The report stated: “In advanced economies, financial conditions remain very supportive, the drag from fiscal policy tightening has gone, and the investment cycle is firming up. Meanwhile, tight labor markets are bolstering consumer confidence and household spending.”

According to the report, U.S. growth is expected to rise next year in response to tax cuts and accelerating private investment.

In this respect, U.S. growth expectation is revised upto 2.3% from 2.1% for 2017.

It also noted that the Eurozone growth forecast for next year has been revised to 2.2% from 1.8% as the recovery proves more powerful and durable than anticipated.

On the other hand, China's slowdown is expected to be modest, while the stabilization in commodity prices are helping emerging markets outside China to continue to recover from the sharp downturn in 2015.

It is stated that China's economy is likely to slowdown in 2018, but the slowdown is expected to be relatively modest with growth easing to 6.4% from 6.8% this year.

According to the report, external conditions are likely to remain favorable for Emerging markets (EM) next year and EM growth is expected to edge up to 5.2% in 2018 as recoveries in Russia and Brazil strengthen, and India picks up somewhat after temporary factors dampened growth in 2017.

It added: “The pick-up in GDP growth in the advanced economies looks increasingly likely to boost investment, where traditional accelerator forces on investment growth will start to be felt as companies strive to expand the capital stock in response to stronger demand.”

U.K. growth forecasts have been revised slightly to 1.6% in 2017 and 1.4% in 2018, backed by incoming data and a looser fiscal policy stance.

It is also noted that the possibility of a further escalation in Saudi Arabia-Iran tensions could lead to a sharp rise in oil prices, which would be hard for central banks to ignore in the context of a rapidly diminishing economic slack.