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Fitch: 2020 global economy growth to be slowest since 2012 as trade woes bite

The global economy is projected to expand next year at the slowest pace since 2012 due to the escalation in trade tensions between the U.S. and China, Fitch Ratings said in its latest Global Economic Outlook report.

Fitch now expects global economic growth to slow to 2.6% this year from 3.2% in 2018, before decelerating further to 2.5% in 2020. The new forecasts mark a reduction of 0.2 percentage point from the rating agency's previous outlook report in June on the back of a "sharp escalation" in the U.S.-China trade dispute over the summer.

All but one of the 20 countries covered in the rating agency's outlook are expected to record slower growth in 2019, while at least 16 economies had their 2020 growth forecasts revised downward. In particular, Fitch lowered its 2020 growth forecasts for China, the eurozone and the U.S. to 5.7%, 1.1% and 1.7%, respectively, from its previous estimates of 6.0%, 1.3% and 1.8%.

Newly announced U.S. tariffs on Chinese imports will raise the effective levies on such goods to nearly 25% by 2019-end, the rating agency said. Beijing will ease domestic macro policies in a bid to counter its economic slowdown, which will also continue to pressure growth in the eurozone, where Germany is expected to enter into a technical recession in the third quarter.

Meanwhile, the U.S. will see a deterioration in exports, manufacturing and business investment. Still, Fitch only expects "a slowdown rather than a recession ahead" for the U.S. as its economy continues to see robust consumer spending, a tight job market and expansionary fiscal policy.

Amid the global economic slowdown, Fitch does not expect the Federal Reserve's recent rate cuts to mark the beginning of a period of more cuts and projects that the U.S. central bank will remain on hold through next year. In contrast, S&P Global Ratings expects the Fed to deliver its third rate cut of the year in December.