Country Forecast World

  • ID: 2101439
  • September 2016
  • Region: Global
  • 39 Pages
  • The Economist Intelligence Unit
1 of 3

The Economist Intelligence Unit has edged down its forecast for global growth in 2016 to 2.1% (from 2.2% previously), owing partly to a downgrade to our US growth forecast to 1.6% (from 1.8%). A slowdown in US growth in the first half was due in part to inventory changes, and a much stronger performance is in prospect in the second half of 2016. Our 2017 global growth forecast is unchanged at 2.4%, as are our forecasts for 2018-20.

As expected following the Brexit vote, the Bank of England cut its policy rate to 0.25% from 0.5% and relaunched its bond-buying programme in August. We expect interest rates to remain unchanged in the euro zone and Japan throughout the forecast period. Our forecast for US policy rates remains above market expectations.

Unusually low bond yields in developed markets are fuelling demand for risky assets, including the equities, bonds and currencies of some emerging markets. If sustained, capital inflows will improve the economic outlook for these markets.

Note: Product cover images may vary from those shown
2 of 3

Country Forecast World

Key changes since July 18th

World growth and inflation
Central banks are reaching the limits of their capabilities
The US will remain the engine of growth in the OECD-until 2019
Conditions have improved for emerging markets
Managing the maturation of the Chinese economy is getting trickier
The shock of Brexit has worn off but its consequences will be profound
Populist politicians are gaining traction owing to disaffected electorates

World growth and inflation: Risk scenarios
Negative scenario-China experiences a hard landing
Negative scenario-Currency depreciation and persistent weakness in commodity prices culminate in emerging-market corporate debt crisis
Negative scenario-"Grexit" is followed by a euro zone break-up
Negative scenario-Beset by external and internal pressures, the EU begins to fracture
Negative scenario-Donald Trump wins the US presidential election
Negative scenario-The rising threat of jihadi terrorism destabilises the global economy
Negative scenario-Chinese expansionism leads to a clash of arms in the South China Sea
Positive scenario-Global growth surges in 2017 as emerging markets rally
Negative scenario-Rising tide of political populism in the OECD results in a retreat from globalisation
Negative scenario-A collapse in investment in the oil sector prompts a future oil price shock

Regional summaries: North America
The US has had a soft start to 2016 but will improve in the second half
The US is set for three more years of economic expansion
Economic growth below 3% is the new normal for the US
Democrats could seize the presidency and the Senate in November
A recession is likely to wreck Democratic hopes for another two-term presidency
The short-term outlook in Canada has been altered by huge wildfires

Regional summaries: Europe
Brexit vote triggers a crisis of sovereignty, security and identity
Brexit will have damaging political and economic consequences across Europe
Brexit vote puts the heat on Italian banks
The ECB pursues a loose monetary policy
Slow progress in the euro zone labour market
Central and east European countries face a tough year
Russia will experience a second successive year of recession
A military coup in Turkey is swiftly quashed

Regional summaries: Asia and Australasia
Looser monetary policy around the world will benefit Asian economies
Our China outlook diverges significantly from the government's targets
China receives a strong legal rebuke in the South China Sea
The Japanese government's fiscal stimulus is not as powerful as it looks
The BOJ will come under pressure to change its strategy
India's government will fail to break the legislative deadlock
The new Australian government is facing legislative deadlock

Regional summaries: Latin America
Signs that the worst is past in Brazil

Regional summaries: Middle East & Africa
Low oil prices continue to weigh on economic activity in the Middle East
Economic growth will quicken in 2017-20
Governments are intensifying reform efforts in response to low oil prices
The Middle East will remain a global instability hotspot in 2016-20
Conflict and instability will drag on in Libya and Syria
Growth in Sub-Saharan Africa will recover from 2017, but not significantly
Despite subdued commodity prices, progress on reforms will be slow
Inflation will ease from 2017, as food supplies and exchange rates stabilise
Risk of social unrest and terrorist attacks will remain high

Exchange rates
Sterling plunges on Brexit
Emerging-market currencies continue to attract yield-seeking investors

World trade
Global trade growth has reached the bottom of its cycle
The TPP will boost trade and growth, but not until the 2020s
Medium-term trade growth will not return to pre-crisis levels
Structural changes in international trade will ease global imbalances

Commodity prices
High stocks will cap the rise in oil prices in late 2016 and 2017
Brent will slide in 2019-20, after peaking in 2018
Some commodities stand out but prices will generally remain depressed in 2016

Global assumptions

Note: Product cover images may vary from those shown
3 of 3
Note: Product cover images may vary from those shown





Our Clients

  • Western Union Company
  • Wells Fargo & Company
  • Credit Suisse Group
  • Royal Bank of Scotland PLC.
  • Deutsche Bank AG
  • Barclays Bank PLC.