Fitch lowers EM10 growth to 3.9%, China drives revision

The GDP-weighted average potential growth forecast for ten key emerging markets (EMs) has been revised down to 3.9 per cent from 4.0 per cent, Fitch Ratings said in its latest Global Economic Outlook.

The slight reduction is primarily due to a downgrade in China’s growth potential, now estimated at 4.3 per cent—down from 4.6 per cent projected in the 2023 edition. The revision for China had been signalled earlier in a special report released in November 2024.

Fitch also downgraded supply-side potential growth estimates for Mexico (from 2.0 per cent to 1.8 per cent), Indonesia (from 4.9 per cent to 4.7 per cent), and Korea (from 2.1 per cent to 1.9 per cent).

However, these reductions were balanced by upward revisions in four economies—India, Brazil, Russia, and Poland. India’s potential growth has been revised upwards to 6.4 per cent from 6.2 per cent, supported by stronger-than-expected post-pandemic recovery and a reduced cumulative negative ‘level shock’ to its GDP, the rating agency said in a release.

Fitch now estimates India’s scarring impact from the pandemic at a total of 5.4 per cent (2.7 per cent in each of 2020 and 2021), down from the previous estimate of 7 per cent.

Brazil’s potential growth has been raised to 2.0 per cent from 1.7 per cent, while Russia sees a notable increase to 1.2 per cent from 0.8 per cent. Poland’s projection improves slightly to 3.2 per cent, up from 3.0 per cent, due to a stronger contribution from capital deepening.

On an unweighted basis, the average potential growth across the EM10 now stands at 3.1 per cent. Meanwhile, potential growth estimates for South Africa and Turkiye remain unchanged at 1.0 per cent and 4.1 per cent, respectively.

Fitch’s estimates continue to factor in the pandemic-related output losses in 2020 and 2021 for Mexico, South Africa, India, and Indonesia. While these ‘level shocks’ remain, India’s robust economic rebound has prompted a reassessment of its long-term scarring, indicating greater resilience in the aftermath of COVID-19.

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ALCHEMPro News Desk (HU)