Global Economic Outlook until 2020Global Economic Outlook and Forecast until 2020

According to leading research company A.T. Kearney, the global economy is finally entering into a period of more stable growth. In the period until  2020, Kearney anticipates a return to annual global growth of approximately 3 to 4 per cent.  However, identifying specific opportunities will be more difficult than in the previous decade. Through 2020, neither subset of economies—advanced nor emerging—will be as monolithic as in the recent past.

 

The economic outlook for the USA is, according to Kearney, rather healthy and stronger than it has been in years, bolstered by financial sector stability, private sector growth, and rising demand. Unemployment will continue at around 5%. There isn’t too much inflation or deflation.  There is little risk of the irrational exuberance that creates damaging booms and busts. U.S. GDP growth in 2016 will be 2.2%. The economy will grow slightly faster than 2015′s growth rate of 2.1%. The increase in Gross Domestic Product will slow to 2.1% in 2017, and 2.0% in 2018, according to the Federal Open Market Committee (FOMC) forecast of March 16 last.

 

The following chart shows the GDP current prices (in billion USD) and

the Real Growth percentage for 2016 and 2017 selected countries as forecasted by the IMF

Country – Year

2016

 

2017

Australia

1,200.78

2.5

1,262.34

3.0

Brazil

1,534.78

-3.8

1,556.44

0.0

China

11,383.03

6.5

12,263.43

6.2

Germany

3,467.78

1.5

3,591.69

1.6

India

2,288.72

7.5

2,487.94

7.5

Indonesia

936.955

4.9

1,024.00

5.3

Japan

4,412.60

0.5

4,513.75

-0.1

Russia

1,132.74

-1.8

1,267.55

0.8

United Arab Emirates

325.135

2.4

357.269

2.6

United Kingdom

2,760.96

1.9

2,885.48

2.2

United States

18,558.13

2.4

19,284.99

2.5

World

73,993.84

2.5

77,779.05

2.9

 

The economy for the Eurozone is still rather weak. According to the EU Commission, the economic outlook remains highly uncertain and overall risks are increasing. These include lower growth in emerging markets, a disorderly adjustment in China, and the possibility that further interest rate rises in the US could cause disruption in financial markets or hurt vulnerable emerging economies and weigh on the outlook. A further fall in oil prices could also have a negative effect on oil-exporting countries and lower demand for EU exports. Risks from within the EU could also have an impact on confidence and investment. On the other hand, the combination of current supportive factors could translate into greater momentum than anticipated, especially if investment were to rebound.

By 2017, the economies of all Member States are expected to be expanding. GDP growth rates will, however, continue to differ substantially due to both structural features and different cyclical positions. Private consumption is expected to remain the main driver of growth this year and next, supported by an improving labour market and growing real disposable incomes. Investment should also gradually benefit from increasing demand, improved profit margins, favourable financing conditions and gradually lower pressure to deleverage.

 

In Japan, the “Abenomics” economic reform agenda is showing signs of traction. After years of very low inflation or deflation, Japanese inflation is firmly in positive territory and is forecast to remain above 2 percent throughout the rest of 2014. As a result of this positive inflation and the government’s massive fiscal stimulus, stronger economic growth is expected to continue. These positive economic trends demonstrate that the first two arrows of Abenomics—fiscal stimulus and loose monetary policy—are working.

 

Across emerging markets, growth through 2020 will be lower and more divergent than in earlier years. According to Kearney, GDP growth is expexcted to drop to around 5%  in emerging economies is projected to drop slightly, with expected growth of about 5.0 percent per year through 2020, compared to 5.3 percent per year in the period between 2008 and 2013.

 

The latest IMF forecast shows that growth in emerging markets and developing economies is projected to increase from 4 per cent in 2015 to 4.3 and 4.7 percent in 2016 and 2017, respectively.

 

  • Growth in China is expected to slow to 6.3 percent in 2016 and 6.0 percent in 2017, primarily reflecting weaker investment growth as the economy continues to rebalance. India and the rest of emerging Asia are generally projected to continue growing at a robust pace, although with some countries facing strong headwinds from China’s economic rebalancing and global manufacturing weakness.
  • Aggregate GDP in Latin America and the Caribbean is now projected to contract in 2016 as well, albeit at a smaller rate than in 2015, despite positive growth in most countries in the region. This reflects the recession in Brazil and other countries in economic distress.

 

  • Higher growth is projected for the Middle East, but lower oil prices, and in some cases geopolitical tensions and domestic strife, continue to weigh on the outlook.

 

  • Emerging Europe is projected to continue growing at a broadly steady pace, albeit with some slowing in 2016. Russia, which continues to adjust to low oil prices and Western sanctions, is expected to remain in recession in 2016. Other economies of the Commonwealth of Independent States are caught in the slipstream of Russia’s recession and geopolitical tensions, and in some cases affected by domestic structural weaknesses and low oil prices; they are projected to expand only modestly in 2016 but gather speed in 2017.

 

  • Most countries in sub-Saharan Africa will see a gradual pickup in growth, but with lower commodity prices, to rates that are lower than those seen over the past decade. This mainly reflects the continued adjustment to lower commodity prices and higher borrowing costs, which are weighing heavily on some of the region’s largest economies (Angola, Nigeria, and South Africa) as well as a number of smaller commodity exporters.

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The A.T. Kearney report “Beyond the Crisis – Sustained Global Economic Growth?” is available on request. Mail us to get your copy. 

Sources: IORMA  research – IMF World Economic Outlook April 2016, A.T. Kearney