The global economic forecast remains gloomy, with the sluggish recovery in the world’s major economies amid ineffective central bank efforts to boost growth, Fitch Ratings says in a new report.

The rating agency released its latest economic forecasts today. It is modestly paring its forecast for global growth to 2.1% for 2012, 2.6% in 2013, and 3% in 2014, down from 2.2%, 2.8% and 3.1%, respectively. It says that weakness in recent data and other indicators “highlight the persistent weakness and downside risks facing the global recovery”.

For the major advanced economies, Fitch sees growth remaining weak at 1% in 2012, followed by only a modest acceleration to 1.4% in 2013 and 2% in 2014.

“Notwithstanding a new round of forceful monetary policy stimulus measures in September from the Fed, ECB and BoJ, as well as a rate cut by the People’s Bank of China in July, Fitch has revised down its global GDP forecasts for 2012 and 2013,” notes Gergely Kiss, director in Fitch’s sovereign team.
Fitch forecasts that the eurozone economy will contract by 0.5% in 2012, followed by growth of only 0.3% and 1.4% in 2013 and 2014, respectively. It says that business and household sentiment has weakened in recent months, financing conditions remain tight, fiscal austerity measures are biting some of its peripheral economies, and core countries’ growth momentum is slowing.

In the United States, Fitch says that the persistently high unemployment rate, and the deceleration of growth in the first half of this year, underlines the weakness of the U.S. economy, compared with normal cyclical recoveries. Additionally, it says the uncertainty over U.S. fiscal policy may be undermining confidence and acting as a drag on growth. So, Fitch has lowered its 2013 forecast to 2.3%, while leaving the 2012 forecast unchanged at 2.2%.

Emerging markets also face increasing growth challenges, Fitch says, due to some domestic vulnerabilities as well as the weak global outlook.

Fitch also says it expects major central banks to maintain record low interest rates until at least mid-2013, and beyond 2014 in the US. And, while the European Central Bank’s new unlimited sovereign bond buying program has helped to ease financial tensions and to contain the tail risks of the euro zone crisis, Fitch says it is unlikely to offset negative economic trends sufficiently to improve the growth outlook in the short term.