Global GDP growth is expected to remain tepid for the next couple of years as key emerging markets slump, says Moody’s Investors Service.
In a new report, the rating agency says that global growth is unlikely to rebound significantly in the next two years, as a gradual slowdown in the Chinese economy and structural impediments in the euro area, Brazil and South Africa continue to weigh on the global economy. The rating agency sees GDP growth of around 2.8% this year, creeping up slightly to around 3% in 2015 and 2016.
“Most factors that have weighed on global GDP growth in 2014 will remain in place in the next two years, including the gradual slowdown in China,” says Marie Diron, senior vice president at Moody’s. “Moreover, structural deficiencies in some countries and regions — including the euro area, Brazil and South Africa — are also preventing a significant rebound in growth.”
Moody’s says that these factors are weighing more heavily on economic activity than previously expected, and have driven a downward revision in Moody’s 2015 forecasts for many countries and regions, including the euro area, Japan and Brazil.
On the upside however, Moody’s also expects sustained robust growth in the U.S., the UK, and India over the next two years. For the U.S., Moody’s expects +3% growth in 2015 and +2.8% in 2016, “as strong job creation and favourable financing conditions create an environment conducive to realise pent-up demand for consumption.”
“Meanwhile, strong profits and low external financing costs will continue to foster investment by U.S. companies,” it says, adding that the relatively brighter growth prospects in the U.S. will tend to favour domestic investment.