LONDON (ShareCast) – (ShareCast News) – Moody’s has revised its forecast for gross domestic product growth in the G20 economies down to 2.8% in 2016, from 3.1%. The revision mainly reflects the impact of a more marked slowdown currently forecast in China and “more prolonged negative effects of low commodity prices on G20 producers than earlier expected,” the ratings agency said on Friday.
Giving details, Moody’s said it had revised downwards its GDP growth forecast for China in 2016 to 6.3%, from 6.5% previously. Recently published economic indicators show that China’s slowdown in exports and investment had continued into the third quarter of 2015.
In addition, signs that employment growth is weakening point to a more marked and broadly-based deceleration in the Chinese economy than previously expected, said Marie Diron, a senior vice president at Moody’s.
Ongoing policy support from the Chinese government is likely to only partly offset the underlying slowdown in the Chinese economy.
“Slower growth in China makes a significant rebound in commodity prices in the near term unlikely. A more prolonged period of low commodity prices will lead to muted export revenues and investment for commodity-exporting G20 economies,” Diron said.
The agency currently expects negative GDP growth in 2016 in Brazil and Russia, extending the 2015 recessions. The recent fall in commodity prices and further depreciation of the currencies exacerbate an already unfavourable domestic economic environment in both countries.
“At -1%/0% for Brazil and -1.5%/-0.5% for Russia our 2016 forecast ranges are now 0.5 and 1 percentage point lower than in our previous forecast,” Moody’s said. The trade linkages between China and the US and Europe are limited, despite a rapid increase in trade over the past 15 years, according to Moody’s. “The slight downward revision to the US forecast in 2016, to 2.6% from 2.8% previously, is accounted for by more prolonged negative effects of the stronger dollar and lower oil prices than previously expected.” The agency also noted that while the broad-based equity price falls could have a negative impact on investor and consumer sentiment, they will not have a direct significant impact on economic activity in most countries, including in China.
