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Country Forecast World Product Image

Country Forecast World

  • ID: 2101439
  • December 2014
  • Region: Global
  • 57 Pages
  • The Economist Intelligence Unit

The US economy continues to go from strength to strength: Gross domestic product expanded by a robust 3.5% in the third quarter, jobs growth remains buoyant and consumer confidence is surging. With much of the rest of the world sagging, the US will struggle to maintain this pace, but consumer spending will be helped in 2015 by rising incomes and lower fuel prices. The Economist Intelligence Unit maintains its GDP forecast of 3.2% for next year.

We have slashed our forecast for the price of oil in 2015. We now expect an annual average price of US$88/barrel for dated Brent Blend, the international benchmark, down from our prior forecast of US$97.60/b, with a risk of further declines. Surging production, especially in the US, and weaker demand, notably in emerging markets, has expanded stocks, pushing prices sharply lower. The falling price is dire news for producers with weak economies, notably Russia, Venezuela and some African countries, but will be a fillip for big oil consumers.

Japan fell into recession in the third quarter as GDP contracted yet again. After a strong start to the year, the economy has slumped badly following an April tax rise. The Bank of Japan was alarmed even before the latest figures and announced a major acceleration of its monetary stimulus plan in late October. We will cut our 2014 GDP estimate to 0.3% but maintain our forecast that expansive policy will keep the economy on a moderate growth path in the medium term.

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Country Forecast World

Key changes since October 13th

World growth and inflation
The US economy is outperforming its peers
Europe's woes are weighing on the rest of the world
Japan's central bank has launched a new stimulus plan
Our global forecast is largely unchanged this month
Lower oil prices will boost global growth
Can the US continue to prosper while the rest of the world stuggles?
Investors are worried about slowing economic growth
Emerging markets are at risk from rising interest rates in the US
Europe is holding back the global recovery
China remains the global star, despite slowing growth
Political crises are an impediment to growth

World growth and inflation: Risk scenarios
Negative scenario-Deflation derails the economic recovery in the euro zone
Negative scenario-The violent spillover from Syria's civil war overwhelms its neighbours
Negative scenario-Russia's intervention in Ukraine escalates, leading to Cold War-era tensions
Negative scenario-Policy paralysis entrenches the emerging-market economic slowdown
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
Positive scenario-A sustained decline in oil prices provides a global economic fillip
Negative scenario-Economic upheaval leads to widespread social and political unrest
Negative scenario-Social unrest undermines stability in China

Regional summaries: North America
The US is in rude health
US will become world's largest petroleum producer
Job growth will boost private consumption
The end of QE: mission accomplished?
The FOMC will be more dovish in 2015
Angry voters award Republicans Senate majority
Government spending cuts ahead
New Congress brings new priorities
Risks for Republicans
Canada needs to avoid a "hard landing" in the housing market

Regional summaries: Japan
Shinzo Abe faces a pivotal year in 2015
Mr Abe will battle to remain the LDP's central figure
A planned rise in the consumption tax in 2015 will be postponed
The BOJ will keep monetary policy ultra-loose for another two years, at least
Economic growth will struggle for momentum in 2015

Regional summaries: Western Europe
Europe risks a "lost decade"
Banking stress tests will not turn the euro zone around
Few surprises, no game-changers, some reservations
ECB formalises a EUR3trn balance-sheet target
Not a game-changer
Germany looks for compromise on euro zone deficits
The situation is likely to remain edgy
Unemployment remains stubbornly high
Austerity in the UK will bring political challenges in 2015

Regional summaries: Transition economies
Ukraine will continue to cloud the region's prospects in 2015
Russia moves towards a free float as pressures on the rouble intensify
The prospect of an end to bank deleveraging in 2015
Lower oil prices and sanctions will hit the Russian economy hard
Fighting continues to hit the economy in Ukraine

Regional summaries: Asia and Australasia (excl Japan)
Asia will grow steadily, with ASEAN and India offsetting China's slowdown
Medium-term growth would benefit from reform of structural distortions
The Chinese economy appears to be cooling again
Tension in Xinjiang and Hong Kong demands the attention of officials
The Modi administration has made a mixed start
Inflation is falling in India, reflecting the RBI's hawkish stance
The new government in Indonesia needs to boost economic growth
The new constitution in Thailand will be drafted by an exclusive club
The Australian economy remains in rude health

Regional summaries: Latin America
The presidents of both Brazil and Mexico face challenges
Banking systems likely to experience stress as interest rates rise
Brazil's central bank surprises markets with a post-election rate rise
Growth remains slow in Mexico but should quicken over the medium term
In Mexico violence could overshadow progress on economic reform
Brazil was in recession in the first half of 2014
Concerns about payment risk in Venezuela

Regional summaries: Middle East & Africa
Political unrest will limit growth in the Middle East and North Africa
IS has little sway over regional economy
Libya's oil production is recovering strongly, but risks remain high
Looming threats to African growth, but the picture is generally positive
African countries are becoming more dependent on global capital
The impact of Ebola will linger long after the disease is contained
Boko Haram will remain a destabilising factor

Exchange rates
The dollar is climbing against most currencies
The yen is depreciating as the BOJ boost its QE programme
We expect an even stronger dollar in 2015
The euro may continue to show some resilience
Emerging-market currencies may come under pressure again
Despite pressures on emerging-market currencies, a crisis is not inevitable
The recent depreciations were painful but probably necessary
China's renminbi is appreciating again

World trade
The recovery in global trade continues to struggle
Russia and EU trade dispute will hurt growth and trade
The limited WTO trade deal agreed in Indonesia becomes uncertain
The promise of regional trade agreements begins to fade
Euro zone bank deleveraging is slowing, but trade finance is still struggling
Structural changes in international trade will ease global imbalances

Commodity prices
We have slashed our oil price forecast for 2015
Supply is surging, particularly in the US
Commodity prices are on a downward path
Non-metal industrial markets will stay weak
El Niño risks have tempered recently

Global assumptions

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


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