The global economy grew at a 2.5% rate last year, and researchers at Fitch Ratings expect that rate to improve to 2.9% in 2017 and 3.1% in 2018, the highest rate of global economic growth since 2010 and well above average growth of 2.5% in the years since 1990.

U.S. gross domestic product (GDP) grew at a rate of 1.6% in 2016 and Fitch estimates a growth rate of 2.1% this year, followed by growth of 2.6% in 2018 and 2.2% in 2019. Global GDP growth is expected to dip slightly from 3.1% in 2018 to 3.0% in 2019.

Growth in emerging economies is expected to increase from 4.3% last year to 4.9% in each of the next three years. Included in Fitch’s definition of emerging economies are Brazil, Russia, India, China, South Africa, South Korea, Mexico, Poland and Turkey.

Fitch’s 20-nation eurozone is now forecast to post GDP growth of 2.0% in 2017, up 0.3 percentage points since the firm’s last outlook. That boost is largely due to the European Central Bank’s continued quantitative easing (QE) program, which Fitch expects to continue until at least the middle of next year. The end of QE is also expected to lead to interest rate hikes in 2019. Fitch forecasts eurozone GDP growth of 1.8% in 2018 and 1.4% in 2019.

The U.S. Federal Reserve has continued to raise its funds rate, and Fitch expects U.S. real rates to converge to a rate close to potential GDP growth; in other words, between 1.5% and 2.0%, implying a federal funds rate of 3.5% to 4.0%. Fitch expects the funds rate to be above 3.0% by the end of 2019.

The other U.S. development signaled by the Fed is rebalancing of the central bank’s balance sheet. Here’s how Fitch describes what it expects to happen:

[The Federal Reserve’s] June statement announced the intention to cease full reinvestment of maturing principal on its bond holdings in 2017 and provided details on the modalities. Specifically, the Fed only intends to reinvest maturing bonds to the extent that maturities exceed pre-set thresholds. These caps will initially be set at low levels but will rise gradually to maximum levels of USD30 billion per month for Treasuries and USD20 billion for agency and mortgage-backed securities. Hence, after the initial phase-in, up to USD600 billion of bonds would need to be absorbed by the private sector per year as the Fed unwinds QE.

The analysts also identified two key risks to their current forecast. First is further fragmentation in the eurozone. More Brexits will not be helpful.

Second is “aggressive US-led protectionism,” such as trumpeted during last year’s political campaign by now-President Donald Trump. So far, Fitch noted, campaign rhetoric has not “translated into aggressive unilateral measures[, h]owever, a more disruptive approach cannot be ruled out.”

Fitch summarizes:

[T]he improving global growth outlook increases risks associated with reflationary developments, including vulnerabilities to faster-than-expected increases in US and global interest rates and a renewed strengthening of the dollar. Elevated domestic debt levels in China and increased private-sector dollar debt in some other large developing countries highlight the risks for EMs. Meanwhile, there is a possibility of volatility in global fixed-income markets over the medium term if market expectations of a timid pace of Fed normalisation prove incorrect.

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