The outlook in advanced economies for the next several years is muted, despite recent improvements in these countries, according to a new report from Fitch Ratings Inc., which suggests that key factor in the expected flattening will be aging and slow-growth populations.
The credit-rating agency says in the report that it doesn’t expect recent growth gains to be sustained over the medium term. Fitch’s latest global economic outlook indicates that underlying growth performance over the next five years will likely be stuck in the 1.25% to 1.75% range for most of the 10 advanced economies. These include Canada, the U.S., the U.K., Japan, Germany, France, Italy, Spain, Switzerland, and Australia.
“While we have become more optimistic about advanced country growth prospects in 2017 and 2018, our latest assessment of medium-term growth potential suggests that this year and next could be more or less as good as it gets,” says Brian Coulton, chief economist with Fitch, in a statement.
The credit-rating agency points out that the demographic outlook in these markets is set to deteriorate further, and it says that it does not see “a major turnaround in productivity performance after the slowdown witnessed over the last decade or so.”
For example, U.S. potential growth is projected at 1.8% per year, down from the long-run historical average of just below 3%, “with the deterioration primarily reflecting demographics,” the Fitch report says.
Conversely, Australia is expected to see the best performance over the next five years, with potential growth of 2.4%, “reflecting strong population growth and healthy labour productivity.”
Canada’s potential growth is projected at 1.5%, the Fitch report says, noting that this is down from an average annual growth rate of 2.5%.
“The slowdown reflects the flattening in participation rates and a deteriorating demographic outlook,” the report says, noting that “a rising share of over 65s in the population reduces projected growth in the working-age population to 0.4% per annum after averaging 0.8% in the last five years.”