World Economic Outlook for 2015
by John | 28th April, 2017
world economic outlookMost experts are of the opinion that the world economy is going to strengthen in 2015. However, the growth rate would be lower than what most of the economists had projected earlier. The World Economic Situation and Prospects 2014 had projected a higher growth in January 2014, but due to a number of factors that we will discuss later in this article, the current projection stands at 3.2% for 2015. The revision in the growth forecast to 3.2% for 2015 has been made mainly because of the changes in the economic scenario in developing and ‘in-transition’ economies. It is forecasted that the developing countries will continue to grow at a rate of 5.1% in 2015. On the other hand, growth in developed nations is expected to be at 2.4% for 2015. Although there has been a gradual recovery in the economies of both developing and developed countries, the effects of the financial crisis of 2007-08 are still having an impact on the prospects of these economies. Higher unemployment rates and unstable public finances are the major challenges that most economies of the world are facing currently, and it is expected that 2015 will not prove any different. Let’s take a look at some of the most important factors that will have an impact on the world economy outlook in 2015. Employment The global employment levels are expected to grow at a slow pace — as has been the case after the financial crisis of 2007-08. Since 2013, the employment levels in the world have been growing at a pace of 1.4% — lower than 1.7% growth seen before the recession. The recovery in the global economy has done little to boost the job market, with global unemployment levels hovering at 6% by the end of 2013. Developed nations will face the challenge of structured unemployment as long-term unemployment is expected to grow in 2015 as well. Developing nations, on the other hand, might still have to grapple with high informal employment levels, which are around 40% to 50% on an average. Global Imbalances The current-account imbalances of the major economies of the world are expected to remain low in 2015. The US, while having the largest deficit economy, will continue to lower its external deficit. Asian powerhouses China and Japan too are seeing a decrease in their current-account deficits. The deficit of economies of oil-producing nations is projected to increase in 2015, suggesting a weakening in external demand from deficit-hit countries. Commodity Prices It is projected that the global commodity prices will remain high in 2015. The price of Brent crude oil is expected to stabilize in 2015 due to the slow recovery of the global demand for oil. However, geopolitical tensions in the Middle East will play an important role in determining oil prices; any tensions in the region can lead to an increase in the oil prices. The prices of agricultural products are also expected to remain low in 2015 due to the increased plantation for highly priced staples. Also, as 2013 proved to be a bumper year for agricultural products, leading to increase in agricultural stocks, the price of agricultural products is expected to remain low in 2015 as well. Inflation Global average inflation levels are expected to increase mildly in 2015. Economists are of the opinion that although inflation levels in developed nations will increase slightly in 2015; the EU might be heading to deflation. Substantial gaps in the output, slow economic recovery, and increase in the value of regional currencies are the prime reasons for the projection of deflation in the EU. As far as developing nations are concerned, inflation levels are expected to remain low, primarily because of the sharp decrease in the inflation levels in India and Iran. World Economy Outlook for 2015: Region-Wise Outlook world outlookUnited States Although the outlook for the US is positive, there are a number of concerns that can pose serious challenges to the economy in 2015. There are also positive forecasts about the business investment and labor market, but the foreign demand is expected to remain low. Most economists are of the belief that the effects of phasing out quantitative easing (QE) will be seen on the US economy in 2015. Concerns about increase in the long-term interest rates and the threat of geopolitical tensions are challenges for the US economy in 2015. Private consumptions is expected to grow by around 3% in 2015 in the US. This is due to the positive effects of the recovery in the US housing market and the slight improvement in the employment levels. Although the housing market is showing signs of improvement, it is nowhere near the pre-crisis levels. The recovery that the housing market saw in 2013 was offset by the Federal Reserve’s decision to phase out quantitative easing (QE). The labor market has shown signs of recovery, but considering the projected unemployment levels of 5.8% in 2015, there is a still a lot of work that needs to be done. The real exports and imports are expected to grow at a rate of around 5-6% in 2015. The tapering of the long-term government bonds and mortgage-based securities is expected to be complete by this year end and this may have a bearing on the federal funds interest rates, which is expected to be around 0 to 0.25% by the mid of 2015, and increase thereafter. Canada The Canadian economy is expected to grow at a rate of 2.8% in 2015. Currently, Canada is facing challenges with rising unemployment levels and reduced household consumption growth. Canada has been in news all through 2014 for its red-hot housing market, which was due to the historically low-interest rates. However, if the interest rates increase in 2015, there could be a downturn in the Canadian housing market. The outlook for Canadian economy in 2015 will be largely dependent on the economic scenario in the US, which is its largest trading partner. Australia The growth of Australian economy is expected to be around 2.2% for 2015. The Australian economy was heavily dependent on its exports in 2013, and it is expected that exports will continue to drive the economy in 2015 as well. However, the reduced demand in the global market might lead to a downturn in the exports next year. Australia’s large mining resources are expected to appeal to investors all around the world in 2015. Private consumption and household savings might see an increase in 2015 as Australians look for ways to deal with the rising unemployment levels. Inflation levels in Australia are expected to remain below 3% in 2015. The outlook for unemployment levels is positive and it may come down slowly in the next year. Western Europe The GDP growth in the western European region is expected to grow by 1.8% in 2015. The region has a long road to recovery as the GDP is still to match its pre-recession level. The credit policy has become a lot stricter since the financial crisis which has made it difficult for the development of small and medium businesses. The slow growth in the region has caused the inflation levels to remain at a low level for a long time now, and experts worry the region might face deflation in the next year. The United Kingdom, Germany, Spain, and Italy are the countries that are recovering from the effects of the financial crisis of 2007-08. This was some information on world economy forecast for 2015. Although there are a number of positive indicators for 2015, it’s also true the global economy will face myriad challenges as well. Concluding, we hope that this article gives you an insight into the world economy outlook for the next year.