With China’s recovery looking stronger than expected but Europe’s downturn appearing deeper, the global economy is in line to meet GDP forecasts for 2020, says Fitch Ratings.
In a new report, the rating agency said that the latest GDP readings from various regions indicate that global GDP overall remains on track with its latest forecast for a 4.6% drop in 2020.
While certain major economies, including Japan and the U.K., have yet to report their second quarter results, Fitch said the data so far — including readings from the U.S., China and the eurozone, which represent about two-thirds of global output — show that this global forecast remains in sight.
Fitch reported that China’s recovery has been notably stronger than forecast, but that weakness in Europe proved worse than expected.
“We have recently revised up our China 2020 GDP forecast to 2.7% from 1.2%,” the agency said.
But, it also warned that a downward revision to its GDP forecast for Europe — it currently expects an 8.0% decline in 2020 — is likely in its next forecast, which is slated for early September.
“The strength of China’s rebound highlights the importance of coronavirus containment in speeding up the post-lockdown pace of economic recovery,” Fitch said.
Conversely, Q2 GDP reports have revealed that regions with a heavier reliance on the hard-hit hospitality sector are seeing larger downturns.
For instance, Fitch noted that Spain — where accommodation and food services account for a high share of total GDP — suffered a large negative surprise in the second quarter.
Large drops in Q2 GDP “were also closely correlated with the decline in visits to retail and recreation venues,” Fitch said.