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World economic growth will come in stronger this year before ticking down in 2025, according to Fitch Ratings’ latest forecast.

The rating agency increased its forecast for global GDP growth in 2024 to 2.6%, up from its previous call of 2.4% growth.

The revised forecast reflects Fitch’s increased confidence in the prospects for economic recovery in Europe, stronger momentum for domestic demand in emerging markets (excluding China), and improvements in China’s export sector.

“European recovery prospects are on a firmer footing as the terms-of-trade and energy shock reverses, energy-intensive industries start to pick up in Germany and real wages rebound,” Fitch said in its forecast. “Stronger real incomes will boost spending by households with robust financial buffers, while the drag from earlier [European Central Bank] tightening diminishes.”

The firm’s forecast for U.S. growth in 2024 is unchanged at 2.1%, it said, adding that monetary policy is starting to relax.

“The expected pivot to global monetary policy easing is now taking shape, with the ECB recently cutting rates and the U.S. Federal Reserve and the Bank of England both expected to follow suit in [the third quarter],” it said.

“But inflation is surprisingly persistent and we now expect global rates to decline at a shallower pace over the next 12–18 months,” it said.

Fitch said it expects the ECB to cut rates twice more this year, and the Fed to first cut rates in September and again in December.

“This is later than we had expected, reflecting stalled disinflation momentum in the first four months of the year,” it said. “But U.S. wage growth is gradually cooling.”

“Nevertheless, central banks remain cautious about loosening policy too rapidly, particularly in light of high services inflation,” it said.

For 2025, Fitch forecasts world growth to dip to 2.4% “as U.S. growth slows to a below-trend rate of 1.5% and growth in the eurozone picks up to 1.5%. We also expect growth in China to fall to 4.5% next year as exports and government spending decelerate.”