Moody's revises up G20 growth forecasts

UK projections lowered to 1 from 2 percent

ANKARA (AA) - Moody's on Thursday revised its growth forecasts for G20 countries raising projections by 0.4 percentage points to 3 percent for 2017 and 2018.

"The modest momentum of emerging market economies, coupled with developed countries performing close to their potential, will help the global economy expand this year.

"Nonetheless, the outlook could still be impacted by significant shifts in US policy on a number of issues, including trade and immigration," the agency said in a report.

Moody's noted that the average growth in emerging economies would climb to 4.8 percent in 2017, and reach 1.9 percent for advanced economies.

The growth rate for European Union's largest economy Germany was revised up to 1.6 percent in 2017 and 2018, from 1.5 percent in the year and 1.4 percent in 2018 as the ratings agency emphasized the drivers of growth last year -- a robust labor market, rising wages and low interest rates - remained in place and should underpin consumption.

"The strengthening industrial sector combined with a tight labor market should also support faster investment spending in Germany," it said.

According to Moody's, political risks around the euro area will remain at the forefront this year.

"There is a risk that anti-establishment parties make meaningful gains in elections scheduled in France, Germany and the Netherlands. Italy may also be headed for early federal elections," it said.

Madhavi Bokil, a Vice President and Senior Analyst at Moody's said that with such an outcome, the big economic risk is that "it could lead to any of these countries potentially leaving the euro area," which "could result in a resurgence of the European crisis".

The UK growth forecast was lowered for this year, to 1 percent, from the previous 2 percent, as "the country negotiates the terms of its exit from the European Union".

Elena Duggar, an Associate Managing Director at Moody's said that among the main risks facing the global economy "is that a significant protectionist shift in US trade policy could impair global trade flows and damage the global economic recovery".

The agency warned that the global risk from an aggressive use of tariffs, in conjunction with nationalistic rhetoric, is that it could set off a trade war, which would likely prove detrimental to a large number of advanced and emerging countries.

"If other countries followed with their own protectionists policies, it would certainly be detrimental to global productivity and growth," it said.

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