Global nominal GDP growth rate is expected to be below 2.2% in 2026 as well. File
| Photo Credit: Reuters
Fitch ratings cut global GDP growth forecast for 2025 to 2.3%, down 0.3 percentage points as U.S. tariff hikes are “rapidly unfolding”, according to a report titled “Global Economic Outlook” by the global rating agency.
The global economy grew at a rate of 2.9% in 2024, and the agency had predicted it to grow by 2.6% in its December update.
“There is great uncertainty about exactly how far the U.S. will go, but we think a reasonable base case assumption is that the U.S. [effective tariff rate] ETR rises to 18% this year, with large hikes on Europe and the rest of the world implemented soon.”
Global nominal GDP growth rate is expected to be below 2.2% in 2026 as well. The ratings agency cut forecast the most for U.S., trimming it by 1.1 percentage points. Fitch estimated the growth rate at 1.7%, from 2.8% in 2024.
Fitch had estimated the GDP growth rate for the U.S. to come in at 2.1% in 2025.
Besides the U.S., the GDPs of China, Eurozone and emerging economies are expected to grow slower than the speed at which it had grown in 2024. Japan is an exception as it is estimated to grow at 1.1% in 2025, as against a pace of 0.1% in 2024. However even this is lower than the estimation in the December outlook.
The estimation was made on the assumption that the effective tariff rate (ETR) by the U.S. to the rest of the world is 15% until 2026. Tariffs for imports from Canada and Mexico is assumed to reduce to 10% on 2026. For China however, the ETR is assumed to be at 35% and is expected to stay there with an upside risk until 2026.
India’s outlook is better than the world average with an outlook of 6.3% for fiscal 2025 and 6.5% for financial year 2026, more or less in line with the government estimates. The current fiscal growth estimate was slightly trimmed from the December estimate of 6.4%. The lower exposure to external trade is expected to insulate India from tariff action to some extent.
“These forecasts are little changed from the December GEO. More aggressive-than-expected U.S. trade policies are an important risk to our forecast, though India is somewhat insulated given its low reliance on external demand,” the Fitch report read.
Published – March 19, 2025 07:07 pm IST
