KUALA LUMPUR (Nov 14): The global economy may not enter into a recession in 2020 or 2021, but persistently weak data could fuel a self-fulfilling deterioration in sentiment and global growth, says Moody's Investors Service Inc.

The credit rating agency said business sentiment across major economies has become downbeat with a growing concern that a recession is only a shock away.

In a statement today, Moody's vice president Madhavi Bokil said although slowing growth has led to synchronised monetary policy accommodation — which will support financing conditions — trade uncertainty is still a major downside risk to its outlook.

Moody's projected that the G-20 economies, which account for 78% of the global economy, will collectively grow at an annual rate of 2.6% in 2020, the same rate as in 2019.

Meanwhile, the G-20 emerging market countries are expected to post growth of 4.7% in 2020, followed by 4.8% in 2021.

Furthermore, deceleration for the US and China is anticipated to continue into the next year.

"Although the US economy is slowing, real GDP growth in the US will likely stabilize around its potential at just below 2%. In the UK, political instability and persistent uncertainty over the timing and terms of Brexit have begun to harm the UK economy.

"In other emerging markets, growth prospects will remain sluggish, even though the pace of economic activity will improve, with the exception of China," it said.

Moody's observed that although the efforts of central banks to stimulate the economy have aided financial conditions, the initiatives may have seemingly failed to encourage stronger inflation.

"With negative interest rate policies remaining firmly in place, policy rates in advanced economies will remain at low or negative levels, reflecting the constraints of the lower trend growth and low inflation environment on monetary policy," it added.