Fitch is now assuming the Brent oil price averages $35 per barrel in 2016 and $45 in 2017 respectively, down from $55 and $65 in December. These revisions reflect a strong inventory build, higher than expected OPEC production in January and deteriorating prospects for world GDP growth.
Global rating agency Fitch has made widespread downward revisions to growth forecasts in its latest Global Economic Outlook (GEO). While the biggest#
In Russia, lower oil prices are reducing corporate incomes and have prompted pro-cyclical fiscal policy tightening, while high interest rates and falling real wages are squeezing consumption. Fitch has revised its 2016 forecast down to -1.5 per cent from +0.5 per cent in December. Weakening commodity prices have also been weighing on the outlook in Brazil. However, the latest forecast revision to -3.5 per cent for 2016 (from -2.5 per cent in December ) also reflects heightened political uncertainty and its impact on confidence, deteriorating labour market and credit conditions and the pro-cyclical tightening in macro policy through 2015.
Tighter fiscal and monetary policy settings in the face of weak growth and rising inflation were also a factor in the revision of South Africa's forecast since December (down to 1 per cent from 1.7 per cent in December). Growth in China is expected to be slightly weaker at 6.2 per cent (down from 6.3 per cent) reflecting revisions to external demand, but recent credit data and stepped up policy easing suggest that risks to the 2016 forecast are balanced.
Fitch has revised US growth in 2016 to 2.1 per cent from 2.5 per cent in December reflecting deteriorating export prospects and some broader weakening of demand in 4Q15. Japan's 2016 outlook has been lowered on the surprise weakening of consumer spending in 4Q15. The revisions to global growth also warrant moderate downward adjustments to euro area forecasts.
Overall, Fitch's forecast says global growth will remain at 2.5 per cent in 2016, the same as 2015. This represents a downward revision of 0.4 percentage points to 2016 global growth. (SH)
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