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Country Forecast World Product Image

Country Forecast World

  • ID: 2101439
  • April 2015
  • Region: Global
  • 58 Pages
  • The Economist Intelligence Unit

The European Central Bank (ECB) began its long-awaited programme of sovereign bond purchases in March. The move, intended to fight deflation in the euro zone, has coincided with a rise in sentiment, brightening the economic outlook. The ECB's purchases are also supporting the recovery by pushing down the value of the euro-thereby improving the euro zone's export competitiveness-and reducing the cost of government borrowing by lowering the yields on sovereign bonds.

The US dollar is soaring against most other currencies, the result of solid growth in the world's largest economy and market expectations that the US Federal Reserve will start a monetary tightening cycle from mid-year. Capital flows into the dollar are, however, causing large depreciations in many emerging-market currencies, which could result in debt-servicing problems in the more vulnerable countries in coming months.

The Economist Intelligence Unit is reducing its forecast for US GDP growth in 2015 slightly to 3.2% from 3.4%. Although US employers continue to create jobs at an impressive rate-nearly 1.3m in the last four months-severe winter weather is likely to have slowed consumer spending in the first quarter, pulling down full-year growth. The strong dollar is also weighing on US exporters. Rising incomes and the benefits of lower oil prices will nonetheless support the economy in 2015.

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Country Forecast World

Key changes since February 16th

World growth and inflation
Central banks in developing countries are in a difficult position
The US dollar has been surging of late
We are lowering our 2015 GDP forecast for the US
The global economy is being pulled in many directions
The price of oil will be exceptionally volatile
Will lower oil prices support economic growth?
Energy exporters will lose half a trillion dollars in income this year
Positive signs in the euro zone despite the risks posed by deflation and Greece
The US economy continues to perform well
Can the US continue to prosper while the rest of the world struggles?
China remains the global star despite slowing growth

World growth and inflation: Risk scenarios
Negative scenario-Economic stagnation and political populism prompt a euro zone break-up
Negative scenario-Policy deficiencies and a commodity price slump entrench the emerging-market slowdown
Positive scenario-A sustained decline in oil prices provides a global economic fillip
Negative scenario-Syria's civil war overwhelms its neighbours and threatens global security
Negative scenario-Russia's intervention in Ukraine escalates, leading to cold war-era tensions
Negative scenario-Tensions over currency volatility lead to a rise in protectionism
Positive scenario-A rapid recovery in parts of the OECD drives global growth higher
Negative scenario-The US economy stumbles in the face of monetary tightening and political dysfunction
Negative scenario-Economic upheaval leads to widespread social and political unrest
Negative scenario-A collapse in investment in the oil sector prompts a future oil price shock

Regional summaries: North America
US economy is still performing well, but weather is a drag in the first quarter
Consumer spending growth reaches nine-year high
Business investment softens and the trade balance deteriorates
Janet Yellen readies markets for first interest-rate rise
Congressional showdowns loom
Canada will experience domestic turmoil because of cheaper oil

Regional summaries: Japan
Shinzo Abe faces a pivotal year in 2015
The government has a great opportunity to implement its agenda
The weak fiscal position remains a long-term problem
The BOJ will keep monetary policy ultra-loose
Economic growth will accelerate, but remain sluggish in 2015

Regional summaries: Western Europe
Greece awarded programme extension by euro zone finance ministers
Not smelling of roses
Long-term future of the euro is not assured
ECB expands QE
Grounds for some optimism in the euro zone
Downside risks are significant
Unemployment remains stubbornly high
Austerity in the UK will bring political challenges in 2015

Regional summaries: Transition economies
The ceasefire in east Ukraine holds
Poland cuts rates as the ECB prepares to launch QE
Intense pressure on the rouble forces Russia into an emergency rate increase
The prospect of an end to bank deleveraging in 2015
Concerns about "Grexit" will weigh on the region's prospects
The ceasefire will not of itself restore Ukraine's economy to growth

Regional summaries: Asia and Australasia (excl Japan)
Asia will grow steadily, assisted by low interest rates
Medium-term growth prospects would benefit from structural reform
The economy will achieve the government's growth target in 2015
The economy requires some complex changes
Tension in Xinjiang and Hong Kong demands the attention of officials
The Modi administration has made a reasonable start
Falling energy costs enable a loosening of Indian monetary policy
The new government in Indonesia needs to boost economic growth
The new constitution in Thailand will be drafted by an exclusive club
Australia is facing a period of political volatility

Regional summaries: Latin America
A recession in Brazil weighs on the region's growth prospects in 2015
Lower commodity prices will compound an uncertain outlook for capital flows
Banking systems are likely to experience stress as interest rates rise
Monetary tightening in the US set to shape policy in Mexico
In Brazil we expect a slight contraction in GDP in 2015
Concerns about payment risk in Venezuela

Regional summaries: Middle East & Africa
Lower oil prices will be felt across the Middle East and North Africa
Non-oil exporters could lose out from lower regional transfers
Looming threats to African growth, but the picture is generally positive
African countries are becoming more dependent on global capital
Nigeria will come close to political collapse
Even assuming that relative stability is maintained, troubles still lurk

Exchange rates
We are strengthening our forecast for the US dollar
Most emerging-market currencies are suffering
Swiss central bank ends forex ceiling against the euro
The yen is depreciating as the BOJ boosts its QE programme
Emerging-market currencies may come under pressure again

World trade
Mixed signals mask an improved outlook for global trade
Russia and EU dispute will hurt growth and trade
Medium-term trade growth will not return to pre-crisis levels
The stand-off ends over the limited WTO trade deal
The focus turns to major regional trade deals
Euro zone bank deleveraging is slowing as outlook for trade finance stabilises
Structural changes in international trade will ease global imbalances

Commodity prices
Supply will continue to expand, even amid low prices
Commodity prices are on a downward trajectory
Metals markets will endure a poor year

Global assumptions

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

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