Fitch Ratings has lowered its economic forecast, amid weakness in Europe, Japan, and some large emerging markets.

In its latest quarterly economic outlook, the rating agency forecasts global growth of 2.0% in 2012, 2.4% in 2013, and 2.9% in 2014, down from 2.1%, 2.6%, and 3.0%, respectively, in its previous quarterly forecast.

Fitch forecasts growth of just 0.9% for major advanced economies (MAE) in 2012, followed by only a modest and gradual acceleration to 1.2% in 2013 and 1.9% in 2014.

“Global growth outturns are continuing to undershoot expectations and risk remain skewed to the downside. Although forceful ECB intervention has eased tail risks in the eurozone, it has so far failed to arrest economic stagnation, the looming ‘fiscal cliff’ could tip the U.S. economy into recession, and China faces a challenging transition towards a more balanced growth model,” says Gergely Kiss, director in Fitch’s sovereign team.

U.S. economic growth accelerated in the third quarter, but the near-term outlook is complicated by the effect of Hurricane Sandy and the looming ‘fiscal cliff’, Fitch says. Its baseline assumption is that the ‘fiscal cliff’ will be avoided, but it does expect a fiscal tightening of 1.5% of gross domestic product (GDP) to materialize. Fitch has maintained its 2013 and 2014 U.S. GDP growth forecasts at 2.3% and 2.8%, respectively.

For Europe, Fitch says that it entered a recession in the third quarter, which it expects to deepen in the coming quarters. Fitch forecasts GDP to contract by 0.5% in 2012, stagnation in 2013 (with -0.1% growth), before a modest recovery of 1.2% growth in 2014. This reflects a reduction in the 2013-2014 forecast, compared to September’s outlook by 0.4% and 0.2%, respectively.

At the same time, emerging markets are facing growing challenges, it says. The combination of weak import demand from the developed economies, and domestic vulnerabilities, has led to a soft patch in Brazil and India this year, it notes. In China, Fitch’s base case is that a modest monetary and public-investment stimulus will raise growth in the fourth quarter and support output growth of about 8% in 2013 and 7.5% in 2014, “though risks surrounding the medium-term transition towards a more balanced growth model are substantial”, it says.

If China were to suffer a hypothetical hard landing, “such a shock would slow global growth significantly”, Fitch says, to 1.7% and 2.1% in 2013 and 2014, respectively. Commodity exporters would also suffer from a steep fall in oil and other commodity prices, it says; and, developed economies generally would face a more persistent impact from the shock as their domestic policies are heavily constrained, it notes.

Ultra-loose monetary conditions are set to endure in the advanced economies, Fitch predicts. It expects major central banks to maintain record low interest rates throughout 2013 and, in line with the Fed’s guidance, beyond 2014 in the United States.