Fiscal cliff biggest global economic threat: Fitch (by Greg Morcroft)

NEW YORK (MarketWatch) -- The U.S. fiscal cliff is the biggest near-term threat to the global economy, Fitch Ratings said on Thursday in a report published online. "While it is not our base case, the dramatic fiscal tightening implied by the fiscal cliff could tip the U.S. and possibly the global economy into recession. At the very least it would be likely to halve the rate of global growth in 2013," the report said. The analysts said if the legally-mandated cuts due to kick in at the beginning of 2013 go off on schedule it would trim 2 percentage points off Fitch's 2.3% U.S. GDP estimate for 2013. If that happens, Fitch said the domestic threats would include lower U.S. price and wage inflation and heightened risk of deflation, and the impact on commodity prices. "As domestic demand fell, U.S. imports would drop faster than exports, and the resulting improving trade balance would need to be matched by deterioration in trading partners' balances, causing growth to slow," the analysts concluded.