Fitch Ratings has revised its global growth outlook for 2025, citing stronger second-quarter performance in several regions. However, the agency cautioned that early signs of a slowdown in the United States are now visible.
Global Growth Forecasts Upgraded
The latest projections place world GDP growth at 2.4% in 2025, an increase of 0.2 percentage points from earlier forecasts. Despite the upgrade, growth remains well below the 2.9% recorded in 2024 and is still weaker than long-term trends.
For 2026, Fitch lifted its forecast slightly to 2.3%, reflecting regional variations in resilience and policy support.
Regional Divergences Highlighted
China’s outlook improved to 4.7% from 4.2%, supported by fiscal easing measures and strong export performance despite heavy U.S. tariffs. The eurozone forecast also rose to 1.1% from 0.8%, with tariff front-running providing temporary support.
In contrast, the U.S. growth projection increased only modestly to 1.6% from 1.5%, but Fitch warned that underlying weaknesses are building across multiple sectors.
Concerns Over U.S. Economy
Fitch’s chief economist Brian Coulton stressed that tariff hikes will weigh heavily on global growth, even if short-term clarity has improved. He noted that evidence of a U.S. slowdown is now visible in official data, not just in business sentiment surveys.
The U.S. currently faces an average effective tariff rate of 16%, unchanged from June. While Canada, Mexico, and Europe face lower tariffs, many Asian economies outside China have been hit harder.
So far, tariffs have had only a modest effect on U.S. inflation, with companies absorbing some costs through weaker profits. However, Fitch expects price pressures to rise later in 2025, squeezing household incomes.
Consumer spending has already cooled, job creation has slowed amid tighter immigration, and real wage growth is projected to weaken further.
Monetary Policy Outlook
Fitch anticipates that the Federal Reserve will cut interest rates twice this year, in September and December, followed by three additional cuts in 2026.
Meanwhile, the European Central Bank is not expected to ease further, reducing the likelihood of a U.S. dollar rebound after its depreciation in the first half of 2025.
China and Eurozone Prospects
China has redirected exports and allowed currency depreciation to offset tariffs. Nevertheless, domestic demand remains fragile, and deflationary pressures continue to deepen.
In the eurozone, export momentum is expected to weaken in the second half of the year. However, German fiscal support may help cushion the economy in 2026.
Long-Term Bond Yields Remain Elevated
Government bond yields in major economies, including the U.S., UK, Germany, and Japan, remain under upward pressure. Fitch attributes this trend partly to investor concerns about growing debt supply and fiscal risks.
Fitch’s upgraded global growth forecast reflects resilience in China and parts of Europe, but concerns about the U.S. slowdown, tariffs, and inflationary pressures remain at the forefront. The outlook for 2025 suggests modest global growth, tempered by significant regional divergences and policy uncertainties.
