In its latest report, Moody’s Investors Services forecast the G20 economic growth at over 3% for the current and the next year. In addition, it also warns of geopolitical risks, US protectionism and spill overs from monetary tightening and China’s deleveraging measures.
The ratings agency clarified that strong data in the first two quarters of the year prompted it to raise 2017 growth forecasts for China to 6.8 % from 6.6%; for South Korea to 2.8% from 2.5%; and for Japan to 1.5% from 1.1%.
In tandem, the agency expects acceleration in the Euro zone through the year based on strong sentiment indicators and has hence revised its forecasts to upwards for economies like Germany, France, and Italy.
However, the agency cut its forecast for the United States to 2.2% in 2017 and 2.3% in 2018, citing its weak first half performance and expectations of more modest fiscal incentive than earlier assumed.
According to the Reuters, the report stated, “The balance of risks is more favourable than it was at the beginning of the year. However, we note event risks related to conflicts in the Korean Peninsula, the South China Sea, and the Middle East. The test firing of missiles by North Korea, intensification of aggressive rhetoric on both sides, and a hard-line stance from the Trump administration have raised the risk of a conflict in the Korean Peninsula.”
While labelling the wide-ranging measures of the Donald Trump administration to address bilateral trade issues as unfair trade practices, which could hurt the superpower’s growth, Moody’s warned China of its growing debt and lowered China’s ratings by one notch to A1 in May, saying the financial strength of the economy would erode in approaching years.
While forecasting for India, the agency slightly lowered the rate to 7.1% because of the government’s demonetization policy last year which led to several months of acute shortages for manufacturing and construction firms in particular; although it said it expects the impact to ease in coming months.
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