World Economic Prospects

Abstract

Economic OutlookVolume 38, Issue s11 p. 1-45 Articles World Economic Prospects First published: 20 November 2014 https://doi.org/10.1111/1468-0319.12127AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Abstract Overview: darkness before the dawn? A number of indicators suggest the global economy may decelerate into the year-end. One especially worrying development is an apparent renewed softening in world trade growth. Our OE export indicator dropped in October to its lowest level since May 2013 and some other trade indicators (e.g. for container trade) have also been subdued. At a country level, growth has remained subdued in the Eurozone, prompting another slight forecast downgrade this month. Japan meanwhile slipped back into technical recession in Q3. Emerging markets remain mixed but with an overall soft tone. Among the BRIC economies there are few signs yet of a significant cyclical upturn – and in Russia the situation has deteriorated further. There has been better news from the US, where Q3 growth again came in at an annualised rate above 3% and jobs growth continues at over 200,000 a month. Consumer spending growth ebbed a little in Q3 but we expect it to pick up in the quarters ahead. Despite some gloomy near-term signals, there are a number of key positive factors for 2015 and beyond. The first is the fall in oil prices – now almost 30% down from the June peak – which will support consumer spending and lower business costs. And global policy settings are becoming more supportive. Though the US has now ended asset purchases, the Bank of Japan has announced a big increase in asset purchases. And with the ECB suggesting a possible €1 trillion increase in its balance sheet, the flow of central bank policy support in 2015/16 may not be very different from 2014. Fiscal policy may also be moving in a more positive direction. The Eurozone seems to be edging away from austerity while in Japan there is a strong possibility that the second rise in the consumption tax, planned for Q4 2015, will be delayed. These positive factors mean that we expect world GDP growth to firm from 2.6% in 2014 to 2.8% next year. This will be the best year since 2011, though growth will remain sub-par for a recovery period. Volume38, Issues11November 2014Pages 1-45 RelatedInformation