Moody’s: Global economicrecovery losing momentum

Over the past three months, the global economic recovery from last year's slowdown has lost momentum, with several economies still facing significant challenges and unlikely to quickly resume "normal" growth rates, says Moody's Investors Service in a new report.
Moody's expects the euro area economy, in particular, to experience a deeper and lengthier recession than previously thought, while the US sequestration cuts will weigh on the renewed momentum that is visible in the private sector.
Meanwhile, some major emerging market economies face challenges in spurring investment growth to drive sustainable increases in national income.
The new report, entitled "Update to Global Macro Outlook 2013-14: Loss of Momentum," is an update to Moody's February 2013 Global Macro Risk Scenarios report.
In the G20 advanced economies, Moody's continues to foresee only a gradual improvement in confidence and spending over the coming two years given that fiscal consolidation and high joblessness have continued to impede recovery. Overall, the rating agency expects real GDP growth in the G20 advanced economies of around 1.2 percent during 2013, which is a little weaker than Moody's previous forecast, followed by 1.9 percent in 2014.
As for the G20 emerging economies, Moody's continues to expect growth in these countries to outpace that of advanced G20 members. China is likely to see broadly stable growth this year, while Brazil and India are struggling to boost investment and wider economic growth in the face of private sector caution and relatively high inflation. As such, there remains little chance of a swift return to the strong growth rates seen during 2010 and 2011.
Since February, there has been some crystallization of the risks that Moody's had previously highlighted, with the euro area in particular now likely to see a deeper-than-expected recession. However, evidence of European policymakers' increased tolerance for risk and heightened tensions on the Korean peninsula have also become apparent over the past three months. As such, Moody's believes that the overall magnitude of the potential downside risks affecting its central forecasts is broadly unchanged from the rating agency's February 2013 update. In particular, the three most immediate risks are:
— An even deeper-than-currently-expected recession in the euro area, accompanied by deeper credit contraction, potentially triggered by a further intensification of the sovereign debt crisis.
— Slower-than-expected growth in major emerging markets following the recent slowdown.
— An escalation of geopolitical tensions, resulting in adverse economic developments.
Moody's Global Macro Outlook underpins the rating agency's universe of ratings, providing a consistent benchmark for analysts and investors. The new report reviews key recent developments, provides an update on Moody's baseline forecasts for 2013-2014, and discusses the key risks around the rating agency's forecasts.