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Country Forecast World Product Image

Country Forecast World

  • ID: 2101439
  • March 2015
  • Region: Global
  • 59 Pages
  • The Economist Intelligence Unit

Negotiations between the radical new Syriza-led government in Greece and its EU creditors are at a critical stage. Both sides have taken a hard line, reducing their room for manoeuvre, and the possibility of Greece's departure from the euro zone has increased. Even so, The Economist Intelligence Unit believes that a deal will be struck that will ease the pressures imposed on Greece by its bail-out programme. Negotiations will go to the 11th hour and beyond.

We are raising our 2015 forecast for real GDP growth in the euro zone to 1.4% from 1.1%. After two soft quarters in the middle of 2014, the economy showed some signs of reviving in the final three months of the year. Germany led the way, growing by 0.7% from the prior quarter and by 2.8% at an annual rate. Growth remains meagre to non-existent in France and Italy, and the crisis in Greece could, if it worsens, create a sharp setback to investor sentiment and cause contagion to countries on the euro zone periphery.

The US economic expansion is continuing and showing signs of deepening. Although real GDP growth slowed in the fourth quarter to 2.6% at an annual rate, consumer spending surged, in part because of strong job growth and lower oil prices. Wages in January also climbed, suggesting that incomes-and spending-have further to rise.

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Country Forecast World

Key changes since January 19th

World growth and inflation
Political crises are intensifying even as growth strengthens
Consumers are benefiting from lower oil prices
We are raising our 2015 GDP forecast for the euro zone
Deflation and the crisis in Greece are potential drags on the euro zone
Volatility in the oil market will continue to be an important story in 2015
Will lower oil prices support economic growth?
Energy exporters will lose half a trillion dollars in income this year
The US economy continues to power ahead
Can the US continue to prosper while the rest of the world struggles?
The prospect of higher US interest rates poses risks
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-The US economy stumbles in the face of monetary tightening and political dysfunction
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-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 cools in Q4, but still strong
Business investment and net exports are a drag on growth
Lower fuel costs will boost consumption
Oil-producing states will suffer
Janet Yellen, more than anyone, will shape the economy
What is in prospect for Barack Obama in 2015?
Opportunities and breakdowns
What to watch for
Canada will experience domestic turmoil because of cheaper oil

Regional summaries: Japan
Shinzo Abe faces a pivotal year in 2015
The policy agenda remains the same
The weak fiscal position remains a long-term problem
The BOJ will keep monetary policy ultra-loose
Economic growth will underwhelm in 2015

Regional summaries: Western Europe
Threat of "Grexit" is rising
Little political room for manoeuvre
Contours of a compromise
ECB expands QE and exhorts governments to do more
Grounds for some optimism in the euro zone
Fiscal policy will remain tight
Unemployment remains stubbornly high
Ukraine conflict upsurge widens EU sanctions differences
Austerity in the UK will bring political challenges in 2015

Regional summaries: Transition economies
A ceasefire in east Ukraine is unlikely to signal an end to the conflict
Falling oil prices amplify disinflationary trends
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 IMF grants a new loan programme to Ukraine

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 Chinese economy is performing unevenly
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
Election delays increase chance of political collapse in Nigeria
Even assuming that relative stability is maintained, troubles still lurk

Exchange rates
The US dollar is levelling off after a strong run, but it has further to rise
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
The shift to US dollar strength
Emerging-market currencies may come under pressure again

World trade
2015 will see an improved picture 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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