By Marc Jones
LONDON (Reuters) – Credit rating agency Moody’s raised its 2023 U.S. economic growth forecast on Friday but cut its estimate next year for China, saying that while the risk of a recession had fallen in the United States, China’s challenges were mounting.
“We have raised our growth forecast for the United States’ economy to 1.9% in 2023 from 1.1% in our May outlook, acknowledging the strong underlying economic momentum,” Moody’s said in a report.
The firm, now the only big three agency to have a top notch triple A rating for the U.S. following Fitch’s downgrade last month, kept its 2024 growth forecast at 1%, saying that high interest rates would act as a brake on the economy.
“We believe that it will be difficult for the Fed to achieve a sustained fall in inflation to its 2.0% target if current economic conditions persist,” Moody’s said.
“A few quarters of below-trend growth is required, in our view, to prevent overheating.”
In contrast, it said China was facing “considerable growth challenges” stemming from weak business and consumer confidence amid economic and policy uncertainty, continued property sector woes and an aging working population.
Moody’s kept its growth projection for this year at 5% but cut its 2024 forecast to 4.0% from 4.5% previously. It rates China at A1 with a stable outlook, which is four notches below the U.S.’s top Aaa grade.
“Data from China suggest that the economic recovery from a prolonged zero-COVID policy remains muted, as the reopening momentum seen in March, April and May appears to be waning,” Moody’s said in its report.
“We believe that low consumer confidence is holding back household spending, and economic and policy uncertainty will continue to weigh on business decisions”.
(Reporting by Marc Jones; Editing by Mark Potter)
