The credit-ratings agency Fitch gave a dire warning this morning on the looming fiscal cliff, saying it’s the “single biggest near-term threat to the global economic recovery.”Fitch warned that if the spending cuts and tax increases go into effect at the start of 2013, it has the potential to engulf the U.S. back into a recession and would at least halve the global economic growth rate next year.
Here are the key bullet points from Fitch:
- Fitch would reduce its U.S. economic growth forecast from 2.3% to about 0.3% next year if the cuts and tax increases are enacted.
- The world economy’s growth would increase just 1.3%, down from the 2.6% Fitch currently forecasts.
- It would be a disaster for export-oriented countries like China and Brazil, which would see the biggest GDP declines.
If Congress fails to act before the end of the year, a series of tax cuts and spending programs will expire and could shrink GDP by up to 4 per cent, according to Goldman Sachs analysts.
Last week, The Washington Post reported that Republicans might consider a potential Barack Obama re-election to mean a mandate on enacting his plan to raise taxes on incomes above $250,000.
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