Country Forecast World

  • ID: 2101439
  • July 2016
  • Region: Global
  • 39 Pages
  • The Economist Intelligence Unit
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The Economist Intelligence Unit has edged up its 2016 forecast for global growth at market exchange rates to 2.3% (2.2% previously). This reflects an upgrade to our euro zone growth forecast, to 1.6% (1.5%), and shallower contractions than previously expected in both Russia and Brazil.

The UK referendum on its membership of the EU will be held on June 23rd. We maintain our view that the vote will be in favour of staying in the EU, but some opinion polls suggest a close outcome. A vote to leave the EU could trigger instability across financial markets beyond the UK.

Following a weak May jobs report, the the Federal Reserve (Fed, the US central bank) will hold its rates in June. We still expect two rate rises this year, probably in July in December.

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Country Forecast World

Key changes since May 16th

World growth and inflation
Some respite, but the ills of the global economy will not be cured quickly
Populist politicians are gaining traction
Conditions have eased for emerging markets, but difficult times await
Interest rates will remain low in the developed world
Managing the maturation of the Chinese economy is getting trickier

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-Donald Trump wins the US presidential election
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-The rising threat of jihadi terrorism destabilises the global economy
Positive scenario-Global growth surges in 2017 as emerging markets rally
Negative scenario-The UK votes to leave the EU
Negative scenario-Chinese expansionism leads to a clash of arms in the South China Sea
Negative scenario-A collapse in investment in the oil sector prompts a future oil price shock

Regional summaries: North America
The US has a soft start to 2016 but will improve in the second quarter
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
A crisis of sovereignty, security and identity
We maintain our view that the UK will vote to stay within the EU
An easing of the migration crisis, for now
The ECB loosens monetary policy
Slow progress in the euro zone labour market
Modest upward revisions to our growth forecasts
Central and east European countries face a tough year
Russia will experience a second successive year of recession
Turkey-EU relations: a shift in the balance of power

Regional summaries: Asia and Australasia
Asia will find rapid growth harder to come by in 2016-20
The risk of a hard landing in China is rising
Economic policy will reflect ideological divisions in the government
The Japanese government has unrealistic targets for economic growth
The BOJ is fighting a buoyant yen
India's government will fail to break the legislative deadlock
Australia's coalition government is likely to secure re-election in July

Regional summaries: Latin America
US rate rises likely to curtail the rally in regional asset markets
Amid economic crisis the Venezuelan president may face a recall referendum
Policy continuity guaranteed in Peru

Regional summaries: Middle East & Africa
Economic growth in the Middle East will be capped by low oil prices
Governments are intensifying reform efforts in response to low oil prices
Lower oil prices are unlikely to trigger widespread social unrest
The Middle East will remain a global instability hotspot in 2016-20
Peace efforts in Libya and Syria will yield no immediate results
Growth in Sub-Saharan Africa will recover from 2017, but not significantly
Despite subdued commodity prices, progress on reforms will be slow
El Niño and currency depreciation will push up inflation in 2016
Risk of social unrest and terrorist attacks will remain high

Exchange rates
The dollar remains sensitive to expectations of monetary tightening
Emerging-market currencies are driven by broad risk sentiment

World trade
Global trade in 2015 suffered its worst year since the financial crisis
The TPP will boost trade but not until the next decade
Medium-term trade growth will not return to pre-crisis levels
Structural changes in international trade will ease global imbalances

Commodity prices
We have raised our forecast for Brent in 2016 from US$40/barrel to US$43/b
Brent will slide in 2019-20, after peaking in 2018
Some commodities stand out but prices will generally remain depressed in 2016

Global assumptions

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    This product is pre-publication and is due to be released in July 2016. Order now at this special pre-publication price.

  • Quick Help: The report will be emailed to you. The report is sent in PDF format. This is a single user license, allowing one specific user access to the product.

    This product is pre-publication and is due to be released in July 2016. Order now at this special pre-publication price.


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