Moody’s raises growth fore­casts for France, Germany and Italy

The Malta Business Weekly - - FRONT PAGE -

Moody’s has raised its growth fore­casts for Germany, France and Italy, and says the eu­ro­zone can ex­pect “above po­ten­tial” growth this year and next. But it has low­ered its pre­dic­tion for the US out­look.

In its Global Macroe­co­nomic Out­look it said the eu­ro­zone is ex­pected to grow by 2.1% in 2017 and 1.9% in 2018 com­pared to 1.7% last year.

“Ro­bust sur­vey in­di­ca­tors in euro area coun­tries sug­gest that growth should ac­cel­er­ate through the rest of the year, while the con­sumer con­fi­dence in­di­ca­tor at a 16-year high bodes well for the con­sumer-driven re­cov­ery,” said Mad­havi Bokil, a vice pres­i­dent at Moody’s and au­thor of the re­port. In de­tail it says:

“Moody’s has re­vised up Germany’s GDP growth fore­casts to 2.2% and 2.0% for 2017 and 2018 re­spec­tively. Sim­i­larly, Moody’s has raised its fore­casts for France to 1.6% for both 2017 and 2018, from 1.3% and 1.4% as the re­cov­ery re­mains on track, driven by net ex­ports and in­vest­ment.

“In Italy, Moody’s ex­pects that the re­cov­ery will also con­tinue to ben­e­fit from sup­port­ive mon­e­tary and fis­cal poli­cies, as well as stronger growth in the rest of the Euro­pean Union. Moody’s has re­vised up its real GDP growth fore­cast to 1.3% in 2017 and 2018 from 0.8% and 1% re­spec­tively.

“G20 economies will col­lec­tively grow at an an­nual rate of slightly more than 3% in 2017 and 2018, higher than last year’s 2.6%. With con­sid­er­able slack re­main­ing in some euro area economies and some emerg­ing market coun­tries, the cur­rent pace of growth around 2% in ad­vanced economies and more than 5% in emerg­ing mar­kets is not only sus­tain­able in the near term, there is po­ten­tial for up­side.” As for the US: “Moody’s ex­pects US growth of 2.2% in 2017 and 2.3% in 2018, down from 2.4% and 2.5%, re­spec­tively. The re­vi­sions in 2017 are a re­sult of weaker per­for­mance in the first half of the year. The lower growth fore­cast for 2018 re­flects ex­pec­ta­tions of a more mod­est fis­cal stim­u­lus than pre­vi­ously as­sumed.” On ac­tions by cen­tral banks, Moody’s says: “Mon­e­tary pol­icy in the US should con­tinue to tighten this year and next. Moody’s also ex­pects euro area mon­e­tary pol­icy to be­come less sup­port­ive in 2018, pro­vided that the cur­rent growth mo­men­tum re­mains in­tact. The Bank of Ja­pan’s pol­icy stance will likely be­come less ac­com­moda­tive once the 2% in­fla­tion tar­get is reached, which the cen­tral bank ex­pects in 2019.”

But it warned there were a num­ber of risks, not least the sit­u­a­tion with North Korea:

“A sig­nif­i­cant es­ca­la­tion of any of the sit­u­a­tions in Korea, the South China Sea and other areas could have sig­nif­i­cant neg­a­tive credit im­pli­ca­tions for the global econ­omy,” said Elena Dug­gar, an as­so­ciate man­ag­ing director at Moody’s.

Other risks in­clude a pro­tec­tion­ist turn by the US, and any fi­nan­cial market volatil­ity stem­ming from sud­den changes in market ex­pec­ta­tion re­gard­ing mon­e­tary pol­icy tight­en­ing.

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