Fitch Ratings said that global growth next year will hit its lowest since 2012 when the Eurozone crisis was at its peak.
According to the credit rating agency, global growth is projected to fall to 2.6% this year and to 2.5% next year from 3.2% in 2018.
Fitch has lowered its world GDP growth forecasts both both 2019 and 2020 by 0.2pp in June, in response to the sharp escalation in the US-China trade war over the summer.
”There can be few precedents since the 1930s of global growth prospects being affected so significantly by trade policy disruptions," said Fitch Chief Economist Brian Coulton.
The current global slowdown is highly synchronized with 19 out of the 20 countries covered in Fitch’s Global Economic Outlook report while growth forecasts for 2020 have been revised down for no less than 16 countries since June, Fitch noted.
China growth to sink below 6%
Fitch also revised China's 2020 growth forecast downward to 5.7% from 6.0%.
Lower growth in China will prolong the slump in global trade and manufacturing, which will, in turn, continue to pressure the Eurozone expansion, Fitch said.
Germany has been particularly affected due to its highly open economy and we anticipate a technical recession in Q3 this year, the firm added.
The U-turn in global monetary policy direction was completed in 3Q19 with two interest rate cuts from the Fed, one interest rate cut from the ECB and the ECB announcement of a restart of quantitative easing (QE) asset purchases on an open-ended basis, Fitch pointed out.
"Global central banks have delivered the most rapid and geographically broad-based shift to monetary policy easing since 2009," said Coulton.
However, Fitch said it doesn’t envisage recent mid-cycle 'insurance' based rate cuts from the Fed to mark the beginning of a protracted series of rate cuts.
“We expect the Fed to remain on hold through 2020,” Coulton noted. “There’re also doubts as to how effective monetary easing can be in an environment of sharply rising trade policy uncertainty and its deleterious impact on business investment.