The world’s major advanced economies are likely to experience next year the steepest decline in GDP since World War II, Fitch Ratings said in its latest Global Economic Outlook report yesterday.
The US, the UK, the EU and Japan are expected to see a contraction of 0.8 percent in aggregate GDP growth next year, down from an estimated 1.1 percent this year, the agency said in the report.
The fast deteriorating credit crisis in the advanced economies has resulted in tighter credit conditions worldwide, which have led consumers to reduce spending and forced companies to slow expansion.
“The combination of recession in developed countries, lower commodity prices and reduced international capital flows will result in a sharp slowdown in growth in emerging markets, though most will avoid outright recession,” Fitch said.
On average, global GDP will increase only 1 percent next year, marking the slowest rate of growth since the early 1990s, the report said. The world economy grew an average 3.5 percent over the last five years, it said.
Fitch expects China’s GDP growth to slow to just over 7 percent next year, which will be the slowest growth pace in nearly two decades.
On Monday, Credit Suisse said in a research note that it cut its GDP growth forecast for China to 7.2 percent next year from its previous estimate of 8.8 percent.
Fitch forecast collective growth in GDP of 5.7 percent next year for Brazil, Russia, India and China.
UBS AG has also adjusted downward its global growth forecast to 1.3 percent for next year, from its previous estimate of 2.3 percent, UBS economist Sean Yokota said in a report released on Tuesday.
Yokota said growth of 1.3 percent is well below the IMF’s definition of global recession, which is anything under 2.5 percent.
The recession will hurt Taiwan, prompting UBS to cut Taiwan’s GDP growth to 1.7 percent next year from 3.1 percent.
“Taiwan is a relatively small and open economy and exports are 70 percent of GDP,” UBS said. “When global demand falls it is not just exports that slow but domestic demand as well.”
Furthermore, UBS said it saw further growth headwinds from the rapid fall in asset prices globally, which will have a significant negative wealth effect and reduce demand globally and in Taiwan. The bank expects Taiwan to report 2.9 percent in GDP growth in 2010, the report said.
RSS