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Fitch sees 'sharply deteriorating' global growth but no recession on horizon

Fitch Ratings slashed its global growth forecast for 2019 but said there are still no signs of a new recession, citing relatively strong U.S. growth as one mitigating factor.

In a March 20 report, Fitch projected the global economy to expand 2.8% in both 2019 and 2020, down from its growth forecasts of 3.1% and 2.9%, respectively, from December 2018. The expected year-over-year global growth decline in 2019 would be the biggest since 2012, Fitch said.

Growth forecasts for 2019 were lowered for 15 of 20 countries covered by its report, with a 0.7-percentage-point cut for eurozone growth and a 0.3-point reduction for U.S. growth.

"Despite the sharply deteriorating growth picture, we do not see the onset of a global recession," Fitch said. "The U.S. economy is still growing above trend, low unemployment and solid household income growth are supporting consumer spending and fiscal policy is being eased."

The rating agency also expects the temporary factors that have weighed on eurozone growth to fade away soon, and China to start stabilizing growth from the middle of 2019. "China and [emerging markets] will play a crucial role in the outlook for world trade and GDP growth over the next 18 months," said Fitch chief economist Brian Coulton.

Fitch also highlighted a shift in global monetary policy, with the U.S. Federal Reserve signaling a pause from rate hikes and the European Central Bank likely to maintain rates through 2020.