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World Economic Prospects
Publication year - 2014
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/1468-0319.12114
Subject(s) - economics , china , liberian dollar , current account , world economy , exchange rate , momentum (technical analysis) , us dollar , international economics , monetary economics , geography , political science , archaeology , finance , law
Overview: Global cycle still short of momentumThe global upswing still looks lacklustre. Indeed, for some parts of the world indicators of growth suggest recessionary or near‐recessionary conditions. In the Eurozone, the PMI and IFO surveys have continued to deteriorate and weaker consumer confidence threatens the sustainability of the recent improvement in household spending. In Japan, Q3 GDP growth is likely to be very weak as the economy continues to gasp for air after April's sales tax hike. We have revised down our growth forecasts to 0.7% and 0.9% for 2014 and 2015. Among the emergers, growth is near‐zero in Brazil and Russia, and Turkey and South Africa are flirting with contraction. Growth indicators also remain lacklustre in China – including prices of China‐sensitive commodities like iron ore and copper. The positive news continues to come mostly from the US and UK. In particular, US consumer spending is slowly strengthening on the back of a better labour market. US GDP should now average a 3% annual growth rate for H2 2014, with this pace being maintained into next year. But there have also been important (connected) developments in oil and exchange rate markets. World oil prices have now come down 20% since June. A fall in prices on this scale could, assuming it is not reversed, give the advanced economies a significant boost – especially large net oil importers such as the Eurozone and Japan. Meanwhile the dollar has appreciated around 6% over the same period. In theory this should be neutral for world growth, but insofar as this appreciation boosts growth in weak economies such as the Eurozone and Japan, it may actually help reduce the tail risks to world growth and boost global confidence. Thanks in part to these recent developments, we continue to expect world GDP growth to pick up in 2015, reaching 2.9% from 2.6% this year. This is a modest growth outlook and implies minimal inflation risks – key reasons why we expect global interest rates to rise relatively slowly in the next 18 months.