The global economic recovery is forecast to gain momentum over the next couple of years, driven by stronger growth in developed markets, says Fitch Ratings.

In a new report, the rating agency projects that global growth will accelerate in 2014 and 2015, driven by a strengthening recovery in major advanced economies. At the same time, growth rates are expected to remain broadly flat in emerging markets.

Consistent with its previous forecasts, Fitch says that it sees world gross domestic product (GDP) growth of 2.9% in 2014, rising to 3.2% in 2015, up from 2.4% in 2013.

It notes that favourable economic trends are continuing in the advanced economies, with GDP growth accelerating in the U.S. and the eurozone in the fourth quarter of 2013. However, it sees emerging markets facing tighter funding conditions, lower non-energy commodity prices, structural weaknesses and heightened political risks.

Additionally, Fitch suggests that deflation risk has emerged in the eurozone. “Inflation is unexpectedly low, at 0.8% in February, despite the cyclical upturn and loose monetary conditions. Monetary policy options are more constrained than in other MAEs and low inflation adds to the costs of periphery rebalancing and potentially poses the risk of a debt deflation spiral,” says Gergely Kiss, director in Fitch’s sovereign team.

“Deflation is not our base case, but we forecast eurozone inflation at just 1.2% in 2014 and 1.4% in 2015, persistently below the [European Central Bank’s] target,” Kiss says.

For the U.S., Fitch forecasts real GDP growth will accelerate from 1.9% in 2013 to 2.8% in 2014 and 3.1% in 2015, powered by improving household incomes, strong corporate profitability, an easing in fiscal drag, and accommodative monetary policy. It also sees unemployment rates declining to 6.4% in 2014 and 6.0% in 2015, with inflation remaining subdued.

Fitch expects the gradual recovery in the eurozone to continue, but that high unemployment will persist. For emerging markets, Fitch forecasts growth will reach just 4.5% in 2014 and 4.8% in 2015, which is well below the 6.1% average of 2010-2012.

Monetary policy in the advanced economies is expected to remain data driven and consistent with the central banks’ forward guidance. Fitch says that the U.S. Federal Reserve Board will continue the gradual tapering of its asset purchases and start increasing the policy rate in mid-2015. The ECB is expected to keep interest rates at their current historical lows at least until the end of 2015, although Fitch says that it could loosen policy settings if deflation risks intensify.