Fitch Ratings announced in its September global economic outlook that severe corrections in the stock markets and a reduction in investment in artificial intelligence could push the U.S. economy into recession and reduce global growth to below 1 percent by 2027.
Downside Scenario and Its Impacts
Fitch has modeled a scenario that includes a 35 percent decline in U.S. stock prices and a 15 percent drop in non-U.S. stocks. This scenario also refers to a shock resulting from decreased confidence in private investments in the United States. The results of this scenario indicate a significant reduction in economic activities, with the U.S. economy expected to enter recession and global growth nearing recession levels.
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Global Economic Consequences
Fitch emphasized that these corrections in the stock markets could significantly impact the economic growth of other countries as well. In particular, the agency has predicted that economic growth in the Eurozone and China will be 0.8 percent lower than initial forecasts. Additionally, Canada and Mexico will be more affected due to strong trade ties with the United States. Countries with large information technology and semiconductor industries, including South Korea, will also be impacted by these conditions.
At the same time, this shock could create strong downward price pressures, allowing the Federal Reserve to significantly lower interest rates.
Fitch further predicted that global economic growth will remain resilient in 2026, raising its forecast for global GDP growth from 2.4 percent to 2.6 percent, while maintaining its forecasts for 2027 and 2028 at 2.5 percent and 2.6 percent, respectively.
The agency also noted that private investment in the United States is currently supporting economic growth by backing investments in artificial intelligence. This downside scenario points to the potential sensitivity of future growth to the sustainability of the artificial intelligence investment cycle.
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