World Economic Prospects

Abstract

Economic OutlookVolume 39, Issue s12 p. 1-56 Articles World Economic Prospects First published: 18 December 2015 https://doi.org/10.1111/1468-0319.12190AboutPDF 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 onFacebookTwitterLinked InRedditWechat Abstract Overview: Nervous end to 2015, more of the same in 2016 World growth is still forecast to come in at 2.5% for this year but we have revised down our forecast for 2016, to 2.6% from 2.7% last month, reflecting downgrades in a number of key countries. Next year's growth forecast is below consensus and below the long-term average since the early 1980s, both of which stand at 2.8%. So the world will remain stuck in the sub-par growth phase that began in 2011. Financial markets are also ending 2015 on a nervous note. Global equities are above their September lows but they have been slipping since mid-November and are around 3% down on the year. There has also been a marked sell-off in the lowest-rated corporate bonds – in part reflecting a renewed fall in oil prices. This fall is bad news for highly-leveraged energy firms (and perhaps, sectors exposed to them) and prolonged sectoral weakness may be a drag on US growth. But with supply factors apparently to the fore, lower oil prices should ultimately be positive for most advanced economies plus China and India. Nevertheless, with incoming data for Q4 looking soft we have revised down our 2016 US growth forecast this month from 2.7% to 2.6%. Japan's 2016 forecast has also been cut this month following the BoJ's decision not to expand QE at its recent meeting. And for commodity-exporting emerging markets, little relief seems to be on the horizon. We have lowered our forecast for growth in EM ex-China and India in 2016 to just 1.7%, down from 1.9% previously and well below G7 forecast growth of 2.1%. This month features another downgrade in Brazil, with GDP now seen slumping 2.6% next year. Overall, the macroeconomic backdrop for 2016 looks likely to resemble that seen this year with reasonable growth in the G7, a further controlled slowdown in China and weakness in many other EMs. Downside risks still seem prevalent though: a key concern is that Fed rate rises, weaker commodity prices and rising corporate defaults (including in EM) prompt a more decisive ‘turn’ in the global credit cycle, feeding back into weaker world growth. Volume39, Issues12December 2015Pages 1-56 RelatedInformation