WASHINGTON (BLOOMBERG) - Don't expect global economic growth to reach the level it attained before the financial crisis anytime soon, Moody's Investors Service said.
Expansion in the Group of 20 economies won't return to its pre-2008 rate within the next five years, the credit-rating company said Tuesday in an update to its global outlook. Combined output growth in the group, which includes 19 nations and the euro area, will average 3 per cent per year from 2015 to 2019, about half a percentage point lower than in the decade through 2007.
The world economy is being held back by the crisis's lingering drag on productivity growth, China's slowdown, unfavorable demographic trends and slowing gains from trade, Moody's said.
The company lowered its US expansion forecast for this year to reflect a slower-than-projected rebound in the second quarter, while leaving the G-20 growth forecast for 2015 unchanged at 2.7 per cent.
The report cites a big, sustained drop in Chinese asset prices or a Greek exit from the euro as risks for the world economy.
"The recovery in the US and to a lesser extent, the euro area and Japan, will be offset by the ongoing slowdown in China," low growth or a contraction in Latin America and a stabilization rather than a quick rebound in Russia, Moody's said in a report by analysts including senior vice president Marie Diron in London.
Moody's downgraded its projection for the US expansion to 2.4 per cent this year, from 2.8 per cent forecast in May. Growth in the world's largest economy will accelerate to 2.8 per cent in 2016, the firm said.
The Federal Reserve will start raising rates this year but at a slower pace than in the last tightening cycle, according to Moody's.
The company maintained its projection for 6.8 per cent growth in China this year, slowing to 6.5 per cent next year and about 6 per cent by the end of the decade. Moody's said the range and size of measures by the Chinese government to support growth have been greater than expected, underscoring the economy's weakness.
The recent depreciation of the yuan "so far will not have a significant impact" on growth in the world's second-biggest economy, yet it has "added concerns about what it may portend" for the nation's expansion, Moody's said.
Moody's said it expects oil prices to remain "broadly unchanged" from current levels in the second half of this year before rising slowly starting in 2016.