Fitch Ratings stated that global economic growth is expected to slow to its weakest pace since the COVID-19 pandemic, though the outlook has improved slightly compared to earlier this year. The agency modestly raised its growth forecasts for 2025 and 2026.
The slowdown will primarily be driven by the US, where Fitch projects economic growth to decelerate from 2.8% in 2024 to 1.8% in 2025. While Fitch had anticipated a sharper downturn, the impact of tariffs has been milder than initially feared. Crucially, this has coincided with a surge in private-sector spending linked to the artificial intelligence (AI) boom.
"Robots have come to the rescue," said Brian Coulton, Fitch's Chief Economist. He noted that the scale of AI-driven private-sector investment has largely offset the economic drag from higher tariffs, while wealth effects from buoyant stock markets have also provided a buffer.
According to a report by Fitch economists Coulton and Alex Muscatelli, information technology capital expenditure accounted for nearly 90% of US economic growth in the first half of this year, with related stock market gains potentially boosting consumption.
The report highlighted AI's potential to transform long-term economic landscapes but emphasized significant uncertainty about the magnitude of its impact. The surge in stock markets and AI-related spending has also raised concerns about potential "bubbles" that could destabilize financial markets.
Fitch acknowledged that while US equity valuations appear high by multiple metrics, elevated valuations alone don't necessarily dictate future market trends. The strong recent momentum in AI-related capital expenditure is likely resilient enough to withstand market volatility.
"Moreover," Fitch added, "this capital expenditure boom hasn't been accompanied by any significant increase in non-financial corporate debt as a percentage of GDP so far."
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