Credit rating firm Moody’s cut its 2016 global economic growth forecasts, with China and United States both trimmed and Russia and Brazil seen staying in recession.
It was a surprise move from the firm, coming just 12 days since its last forecasts. It put average growth in the top 20 world economies at 2.8% on average, versus the 3% it had forecast previously. It said the fresh cut reflected information that had become available since the earlier forecasts were published.
China, Japan and Korea’s growth saw downgrades partly due to expectations of more muted exports. Emerging markets Turkey and South Africa had their forecasts reduced too.
“The (China) policy stimulus measures that have been implemented have been broader-ranging and larger than we had expected. This suggests that the underlying economic environment is weaker than we previously thought” the report said.
“We have revised our US 2016 forecast down slightly as the negative impact of the stronger dollar seems more pronounced than we assumed previously,” it said cutting it to 2.6% from 2.8%.
Moody’s kept its Euro zone forecast unchanged despite the recent turbulence in Greece, at one and two percent in 2015 and 2016.
Meanwhile, it said Brazil’s output would shrink as much as 1% in 2016 and Russia’s as much as 1.5%.
“The recent fall in commodity prices and further depreciation of the currencies exacerbate an already unfavorable domestic economic environment in both countries,” the agency said regarding Russia and Brazil.
The price of many globally-traded commodities has fallen very sharply in the last 18 months. The slowdown in China, a major consumer of commodities, will continue to weigh on prices, according to Moody's report.
“Slower growth in China makes a significant rebound in commodity prices in the near term unlikely. A more prolonged period of low commodity prices will lead to muted export revenues and investment for commodity-exporting G20 economies,” said Marie Diron, a senior vice president at Moody’s.