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28-08-2015, 09:28 AM
Moody’s cuts G20 growth forecast
Michael Roddan
[Image: michael_roddan.png]
Reporter
[b]Global ratings agency Moody’s has downgraded its growth forecast for the major economies of the world as China’s slowdown weighs on global demand, while commodity-exporting nations are affected by weak prices.[/b]
Moody’s today said it was revising its economic growth forecast for the G20 group, of which Australia is a member, to 2.8 per cent in 2016, down from 3.1 per cent.
The G20 economies account for around 85 per cent of the world’s GDP and cover two-thirds of the global population.
Moody’s said the downward revision was due to the impact of a “more marked” slowdown expected in China, compounded by the “prolonged negative effects” of low commodity prices on G20 producers than had been expected earlier.
China’s growth forecast for 2016 was downgraded to 6.3 per cent for 2016, from 6.5 per cent, after the slowdown of Chinese exports and investment continued to slow into the third quarter of 2015. China’s official figures put its GDP growth at an annual rate of 7 per cent, according to the most recent data, but the figures are widely met with scepticism.
Moody’s said China’s employment growth was weakening in a more pronounced way, pointing to a broadly-based deceleration in the Chinese economy.
“Ongoing policy support from the Chinese government is likely to only partly offset the underlying slowdown in the Chinese economy,” the ratings agency said.
Slowing growth in China also makes a significant rebound in commodity prices in the near term unlikely, Moody’s said.
Bloomberg’s commodities index, which aggregates 22 prices, recently fell to its lowest point in 13 years. The price of iron ore has touched its lowest point in a decade in recent months, while the prices of oil, copper, zinc, nickel and coal have also traded a multi-year lows.
“A more prolonged period of low commodity prices will lead to muted export revenues and investment for commodity-exporting G20 economies,” Moody’s senior vice president Marie Diron said.
Negative GDP growth in Brazil and Russia, two of the largest G20 member nations, was now expected to extend their 2015 recessions, Moody’s said. Russia’s economy is heavily dependent on oil exports, while Brazil’s exports are concentrated in iron ore, petroleum, other metals and agricultural commodities.
“The recent fall in commodity prices and further depreciation of the currencies exacerbate an already unfavourable domestic economic environment in both countries,” Moody’s said.
Meanwhile, Korea and Japan were likely to face dampened Chinese demand for their manufactured goods and exports.
“A more marked slowdown in China, a major trade partner for both economies, will likely weigh on corporates’ and consumers’ willingness and ability to spend, hampering domestic demand,” Moody’s said.
A stronger dollar and lower oil prices led to Moody’s revising its US growth forecast to 2.6 per cent in 2016, down from 2.8 per cent.
Moody’s said the recent falls on global stock markets would not have a direct significant impact on economic activity in most countries, including China.
- BUSINESS SPECTATOR
- AUGUST 28, 2015 11:03AM
Michael Roddan
[Image: michael_roddan.png]
Reporter
[b]Global ratings agency Moody’s has downgraded its growth forecast for the major economies of the world as China’s slowdown weighs on global demand, while commodity-exporting nations are affected by weak prices.[/b]
Moody’s today said it was revising its economic growth forecast for the G20 group, of which Australia is a member, to 2.8 per cent in 2016, down from 3.1 per cent.
The G20 economies account for around 85 per cent of the world’s GDP and cover two-thirds of the global population.
Moody’s said the downward revision was due to the impact of a “more marked” slowdown expected in China, compounded by the “prolonged negative effects” of low commodity prices on G20 producers than had been expected earlier.
China’s growth forecast for 2016 was downgraded to 6.3 per cent for 2016, from 6.5 per cent, after the slowdown of Chinese exports and investment continued to slow into the third quarter of 2015. China’s official figures put its GDP growth at an annual rate of 7 per cent, according to the most recent data, but the figures are widely met with scepticism.
Moody’s said China’s employment growth was weakening in a more pronounced way, pointing to a broadly-based deceleration in the Chinese economy.
“Ongoing policy support from the Chinese government is likely to only partly offset the underlying slowdown in the Chinese economy,” the ratings agency said.
Slowing growth in China also makes a significant rebound in commodity prices in the near term unlikely, Moody’s said.
Bloomberg’s commodities index, which aggregates 22 prices, recently fell to its lowest point in 13 years. The price of iron ore has touched its lowest point in a decade in recent months, while the prices of oil, copper, zinc, nickel and coal have also traded a multi-year lows.
“A more prolonged period of low commodity prices will lead to muted export revenues and investment for commodity-exporting G20 economies,” Moody’s senior vice president Marie Diron said.
Negative GDP growth in Brazil and Russia, two of the largest G20 member nations, was now expected to extend their 2015 recessions, Moody’s said. Russia’s economy is heavily dependent on oil exports, while Brazil’s exports are concentrated in iron ore, petroleum, other metals and agricultural commodities.
“The recent fall in commodity prices and further depreciation of the currencies exacerbate an already unfavourable domestic economic environment in both countries,” Moody’s said.
Meanwhile, Korea and Japan were likely to face dampened Chinese demand for their manufactured goods and exports.
“A more marked slowdown in China, a major trade partner for both economies, will likely weigh on corporates’ and consumers’ willingness and ability to spend, hampering domestic demand,” Moody’s said.
A stronger dollar and lower oil prices led to Moody’s revising its US growth forecast to 2.6 per cent in 2016, down from 2.8 per cent.
Moody’s said the recent falls on global stock markets would not have a direct significant impact on economic activity in most countries, including China.