Disappointing View on Global Growth Outlook for 2015 (And Beyond)
The Conference Board Global Economic Outlook released its output growth projections for the coming years. World economic growth is currently pegged at 3.2% for 2014 and is looking to accelerate to 3.4% in the 2015 year. For 2015 to 2019, growth is projected to average 3.3% compared to the period of 2020 to 2025 where it is expected to average 2.7%. Unfortunately, this would represent the fourth straight year of disappointing global growth.
According to the outlook, the long-term growth in the area of 3% is sufficient to sustain a moderate increase in global living standards. At the same time it is too low to meet all the future challenges posed by rising middle classes in emerging markets and aging populations in mature economies.
The output growth projections consist of 11 major regions and over 50 mature and emerging economies.
In advanced economies, the prediction is for 2.3% growth in 2015 compared to 1.9% in 2014. Growth in the Euro Area should improve to 1.6% from 0.9% in 2014, while Europe as a whole is projected to grow 2%. For 2015 to 2019, growth is projected to average 1.9% and for 2020 to 2025 growth is expected to slow to 1.2%.
As the global economy progresses, emerging markets will begin to lose their power and growth differential as we are entering a phase where rapid catch-up growth has come to an end. Emerging markets powered the global economy since the late 90's until recently, with an unprecedented growth differential compared to more advance economies. For example in 2014, positive growth surprises in India and Mexico were not able to offset other major shortcomings in Brazil and Russia.
Growth in developing and emerging economies is projected to edge down to 4.7% in 2015, versus 4.8% in 2014 and 6.2% from 2010 to 2013. The major driver for this slowdown is expected to be the Chinese economy, where growth is expected to decline in 2015 to 6.5% from 7.3% in 2014.
Bart van Ark, Chief Economist of The Conference Board, commented on emerging economies:
While the growth contributions from emerging economies are by no means gone, and their growth will continue to be faster than that of mature economies, the significant downshift in their growth trajectories should make us aware that success from the recent past provides no guarantees for the future. For the year ahead in particular, the confluence of multiple geopolitical fissures in Eastern Europe, the Middle East, Western Asia, and (to a less urgent extent) the South China Sea make it even less likely that an emerging-market boom will ride to the rescue of global growth, as it has in the recent past.
Looking ahead the global picture might appear to be downcast but there are opportunities available for both firms and governments that have a realistic understanding of the challenges ahead. This decade of slower growth has the potential to offer a foundation for overcoming the risk of extended stagnation.