Recovery in US and Europe to be offset by China
Recovery in the United States and, to a lesser extent, the Eurozone and Japan, will be offset by the ongoing slowdown in China and only a gradual Russian recovery from its recession, Moody's Investor Service has said.
Moody's is maintaining its base forecast for growth among the G20 countries of 2.7pc this year, rising to around 3pc in 2016, compared to 2.9pc for last year. Those forecasts remain below the G20's average growth rate before the financial crisis, and Moody's said it does not expect growth in the G20 to return to those pre-crisis averages within the next five years.
The main risks to those forecasts over the next two years include a marked correction in Chinese equity and property prices, the prospect of higher interest rates in the US and the lingering threat of a Greek exit from the Eurozone.
Report author Marie Diron said China is a potential risk. "A sharp or long-lasting correction in asset prices in China is one of the risk factors which could result in lower G20 growth than in our baseline forecasts," she said.
Moody's forecast is that US growth will be at 2.4pc in 2015, before rising to 2.8pc in 2016. Robust job creation, high corporate profits, favourable financing conditions and pent-up demand all point to higher GDP growth, the ratings agency said.
GDP in the Eurozone is expected to rise by 1.5pc in both 2015 and 2016, with the weaker euro and lower oil prices giving a boost to the region.
"However, there is no evidence from either increased investment, labour productivity or faster than usual employment growth that structural reforms have markedly lifted the region's growth potential yet," Moody's said.
In China, Moody's maintains its baseline GDP growth forecast of 6.8pc this year and 6.5pc in 2016, before falling towards 6pc by the end of the decade.
The recent stock market correction is unlikely to have a significant impact on China's GDP growth, Moody's said. Japan is one of the few countries that has seen its growth forecast revised up by Moody's this quarter.
Moody's said UK growth appeared "robust and broad-based" although it forecast a slowing pace from 2.7pc this year to 2.4pc in 2016.
In Ireland's case, very strong GDP growth continues and Moody's expects growth of 4pc this year. But it added the Eurozone recovery was not uniform.