Moody’s: G20 GDP growth to ex­ceed 3%

The Sun (Malaysia) - - SUNBIZ -

HONG KONG: Moody’s In­vestors Ser­vice kept its forecast for G20 eco­nomic growth at just over 3% for this year and next, but warned of geopo­lit­i­cal risks, US pro­tec­tion­ism and spillovers from global mon­e­tary tight­en­ing and China’s delever­ag­ing mea­sures.

The rat­ings agency said sur­pris­ingly strong data in the first half 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%.

It also ex­pected the euro zone to ac­cel­er­ate in the rest of the year as sug­gested by ro­bust sen­ti­ment in­di­ca­tors and re­vised up­wards its fore­casts for Ger­many, France and Italy.

The agency cut its forecast for the United States, how­ever, to 2.2% in 2017 and 2.3% in 2018 from a pre­vi­ous 2.4% and 2.5%, re­spec­tively, cit­ing its weaker- than-ex­pected first half per­for­mance and ex­pec­ta­tions of more mod­est fis­cal stim­u­lus than pre­vi­ously as­sumed.

“The bal­ance of risks is more favourable than it was at the be­gin­ning of the year,” Moody’s said. “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 hard­line stance from the Trump ad­min­is­tra­tion have raised the risk of a con­flict in the Korean Penin­sula.”

The agency also said there ap­peared to be “re­newed mo­men­tum” to ad­dress bi­lat­eral trade is­sues that the Don­ald Trump ad­min­is­tra­tion deemed as un­fair trade prac­tices, which could hurt growth if wide-rang­ing mea­sures were in­tro­duced.

For mar­kets, it warned of risks of in­creased volatil­ity due to his­tor­i­cally el­e­vated as­set prices and broad in­vestor ex­pec­ta­tions that in­ter­est rates would re­main low even as the Fed­eral Re­serve and the Euro­pean Cen­tral Bank said they were pre­par­ing to start rolling back un­con­ven­tional stim­u­lus.

While rais­ing its China fore­casts, the agency warned the econ­omy has be­come in­creas­ingly re­liant on new debt to foster growth. The agency down­graded China’s rat­ings by one notch to A1 in May, say­ing the fi­nan­cial strength of the econ­omy would erode in com­ing years.

The agency re­vised its India forecast slightly lower to 7.1% as the gov­ern­ment’s de­mon­eti­sa­tion move last year led to sev­eral months of acute short­ages for man­u­fac­tur­ing and con­struc­tion firms in par­tic­u­lar, although it said it ex­pected the im­pact to ease in com­ing months. – Reuters


File photo shows a pub­lic phone booth dis­play­ing the logo for Tel­stra Corp Ltd in Queens­land, Aus­tralia.

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