“Our revised forecasts show modestly slower growth through 2027. We now see global growth ….rising to 3.3 per cent in 2026 and 2027,” it said.

The risks to the rating agency’s baseline remain on the downside. These include sharply lower labour demand and a spike in bond yields and geopolitical risks.

Macro developments in the biggest three economies remain on different paths. The United States continues to outperform with growth above potential. A slow recovery has begun in the Eurozone, while Chinese growth continues to struggle.

Elsewhere, large domestic economies are doing well, and global trade outside of the booming tech sector is subdued.

Inflation continues to move gradually toward central bank targets. While headline and core measures measured on a 12-month basis remain above target, sequential measures of inflation look more positive, the rating agency said in a release.

Policy rate cuts are now in full swing among the major advanced country central banks.

Financial market conditions have generally eased over the past quarter. Investors' anticipation of policy-rate cuts shows in bond yields, while continued well-behaved labour markets and the low probability of recessions are reflected in bond spreads.

Prices of both financial (equities) and non-financial (particularly housing) assets remain elevated. This reflects strong fundamentals, and general expectations for a soft landing, rising real incomes, and easing inflation.

The slowdown in global GDP growth stems mainly from Asia-Pacific and emerging markets. In 2024, both GDP growth forecasts for Japan and Mexico were lowered by over half of a percentage point. In 2025, the reduction in China's growth forecasts is the main factor behind the rating agency’s estimate of slower global growth.

The United Kingdom, Spain and Brazil led the upside growth revisions for 2024. The other country providing modest upward pressure on global growth was the United States.

S&P Global Ratings’ macroeconomic baseline for emerging markets is unchanged for most economies since the previous quarter. Monetary policy normalisation by the US Federal Reserve, as long as it is accompanied by an orderly slowing of the US economy, is positive for emerging markets. This is particularly true for those economies with strong economic fundamentals, such as in Southeast Asia, it noted.

In several major emerging markets, particularly in Latin America, a high degree of policy uncertainty could keep risk premia elevated. This, in turn, could reduce the magnitude of capital flows those economies receive relative to past Federal Reserve easing cycles.

Fibre2Fashion News Desk (DS)