(Reuters) – The escalation in the ongoing U.S.-China trade war and the prospect of a no-deal Brexit are among trade policy disruptions that are “darkening” the global economic outlook, Fitch Ratings said on Monday.
A no-deal Brexit scenario could lead to a “significant UK recession” in 2020, the ratings agency said, adding that Eurozone growth prospects will be “materially lower” in the event of a no-deal Brexit.
The note added that the impact of China’s slowdown has also been a significant factor in recent growth disappointments in the Eurozone.
Fitch said that the Chinese economy’s growth rate is expected to fall to 6.1% in 2019 and 5.7% in 2020 from the earlier forecasts of 6.2% and 6.0% respectively.
Fitch said that Asia Pacific countries were mostly stable amidst rising global growth risks, with the only negative outlook in the region being on Hong Kong, which was downgraded by the ratings last week following months of protests.
Commenting on activities of central banks, the ratings agency said it looks likely that the U.S. Federal Reserve will cut interest rates by another 25 basis points in December after which it is likely to put rates on hold through 2020.
Fitch added that the European Central Bank is expected to announce significant fresh accommodation very soon, including a restart of asset purchases in October.
The ECB is meeting on Thursday as investors seem convinced it will introduce a new wave of monetary stimulus at the meeting.
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