Country Forecast World

  • ID: 2101439
  • August 2016
  • Region: Global
  • 40 Pages
  • The Economist Intelligence Unit
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The Economist Intelligence Unit's forecasts for global growth are largely unchanged from the interim report published the day after the UK's EU referendum, although our downward revisions to some European countries have been somewhat less pronounced than we had originally expected. We forecast global growth of 2.2% in 2016, quickening to 2.4% in 2017. We expect growth to slow in 2019 as the US suffers a short recession.

Financial markets have rallied since the Brexit vote on the expectation of more accommodative monetary policy, not only in the UK but also in the US. We no longer expect any rate rise in the US this year but forecast two 25-basis-point increases in 2017.

In the UK, Theresa May has replaced David Cameron as prime minister, with the backing of a large majority of Conservative members of parliament. She has made it clear that she will implement the vote in favour of Brexit and has appointed pro-Brexit secretaries of state to some important posts, including the Foreign Office and the new Department for Exiting the European Union.

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Country Forecast World

Key changes since June 24th

World growth and inflation
The terms of Brexit will remain unclear, dragging down global sentiment
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
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
An easing of the migration crisis, for now
The ECB loosens 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
The risk of a hard landing in China is rising
China receives a strong legal rebuke in South China Sea
The Japanese government has unrealistic targets for economic growth
The BOJ is battling against a set of unhelpful trends
India's government will fail to break the legislative deadlock
ASEAN stands to benefit from rising Chinese wages
The new Australian government is unlikely to make big legislative progress

Regional summaries: Latin America
The rally in asset markets looks to be on shaky ground
In Brazil the interim president proposes measures to control the budget deficit

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
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
Sterling plunges on Brexit
Emerging-market currencies are driven by broad risk sentiment

World trade
Global trade will pick up only slightly in 2016, after a disastrous 2015
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
Oil prices have fallen back slightly in the wake of the Brexit vote
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 August 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 August 2016. Order now at this special pre-publication price.


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