Fitch Ratings - Positive US data in 1Q24 have helped to improve Fitch Ratings’ full-year global economic outlook, but have also raised the prospects of a ‘no-landing’ scenario and heightened interest rate uncertainty. In addition, key risks to global credit from commercial property, geopolitics and China’s real estate market remain, which we highlight in a new report.

Fitch upgraded its 2024 US economic growth forecast in its latest Global Economic Outlook to 2.4% from 2.1% at end-2023. Demand and labour market data have continued to be strong despite high interest rates. At the same time, risk assets rallied strongly over the first quarter and ratings trends were broadly positive.

The positive trends over 1Q24 have raised investor hopes for a ‘soft-landing’. However, there is now greater potential for a ‘no-landing’, where there are no rate cuts and economic imbalances, such as a wide fiscal deficit and elevated inflation, remain. Sustained US demand growth would be positive for global credit in the short run, but the change in the interest rate outlook would raise the credit risk environment for rate-sensitive sectors, including real estate and financial institutions, and leveraged sub-investment-grade issuers with a higher mix of floating-rate debt.

The strength of the US outlook has not altered our expectations for the eurozone or China, where we continue to expect a challenging growth environment. The secular shift in commercial real estate remains a key cross-sector risk and the geopolitical environment also maintains a negative risk bias given the potential for tail risk scenarios in Europe, the Middle East and Asia-Pacific.