Noting that the recovery is continuing despite continued financial market volatility, Fitch Ratings has bumped up it global economic growth forecasts.

The rating agency says that the global economic recovery is proceeding in line with expectations, largely due to expansionary monetary and fiscal policy in developed markets and continued strong growth in emerging markets. It has marginally increased its projections for world growth in 2010 to 3.4% (up from 3.2%). Fitch has also hiked its predictions for 2011 to 3.0% from 2.9%, and to 3.3% from 3.0% for 2012.

Fitch says that the upwards forecast revisions are primarily due to additional expansionary measures adopted by U.S. policymakers, including the proposed extension of a number of tax measures, and the introduction of a second round of quantitative easing.

Incoming data has also turned more positive, it says, reflecting strength in private consumption and corporate profitability. As a result, Fitch has raised its U.S. growth forecasts by 0.6% in both 2011 and 2012 to 3.2% and 3.3%, respectively. Unemployment is now also expected to moderate to 9.1% in 2011 and 8.7% in 2012, it notes.

Despite the improved outlook, the agency’s view remains that the recovery will continue to be mild by historical standards in light of still weak labour and housing markets. Persistently weak domestic demand also continues to weigh on growth prospects in Japan in the medium term, it adds.

Fitch has marginally revised down its medium term forecast growth in the United Kingdom from 2.3% to 2.0% in 2011 and 2.6% to 2.4% in 2012, reflecting still weak consumer and business confidence in the context of heightened volatility in Europe and plans for fiscal consolidation at home.

In the euro area, Fitch says that “although economic challenges facing the peripheral economies are significant, the severity of the market turmoil is not warranted by underlying fundamentals”. Still, heightened volatility has eroded the growth outlook for a number of countries, resulting in a downward revision of some of Fitch’s growth forecasts in the area, it reports. Although, has revised its outlook for Germany upwards due to its view that secular growth is now emerging along with the expected cyclical rebound.

Emerging markets continue to outperform expectations and Fitch has raised its 2010 forecasts for China, Brazil, and India due to still buoyant economic growth. However, the agency has revised its Russian forecast down “as the pace of recovery proved weak, partly as a result of the severe drought and heatwave in the summer”.