The International Monetary Fund (IMF) in its recent publication of World Economic Outlook (WEO), July 2015, has projected India to grow at 7.5% in 2015 and 2016, thereby leading the growth charts. Amongst BRICS economies, China is projected to grow at 6.8% in 2015 and 6.3% in 2016, followed by South Africa with growth rates projected at 2% in 2015 and 2.1% in 2016. Brazil is projected to grow at (-)1.5% in 2015 and 0.7% in 2016, and Russia at (-)3.4% in 2015 and 0.2% in 2016.
The global growth is projected at 3.3% in 2015 and 3.8% in 2016. The growth projection reflect to an important extent an unexpected output contraction in the US , with attendant spillovers to Canada and Mexico . One-off factors, notably harsh winter weather and port closures, as well as a strong downsizing of capital expenditure in the oil sector contributed to weakening U.S. activity. Outside North America , positive and negative surprises were roughly offsetting. Growth in output and domestic demand in emerging market and developing economies broadly weakened, as expected.
World economy so far
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GDP (World Output)
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Y-O-Y Growth (%) 2014
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Y-O-Y Growth (%)
Projections1
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2015
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2016
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World2
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3.3
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3.3
|
3.8
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Advanced Economies
|
1.8
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2.1
|
2.4
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USA
|
2.4
|
2.5
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3
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Euro Area3
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0.8
|
1.5
|
1.7
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Japan
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-0.1
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0.8
|
1.2
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United Kingdom
|
2.9
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2.4
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2.2
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Emerging and developing Economies4
|
4.6
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4.2
|
4.7
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Russia
|
0.6
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-3.4
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0.2
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China
|
7.4
|
6.8
|
6.3
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India5
|
7.3
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7.5
|
7.5
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Brazil
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0.1
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-1.5
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0.7
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South Africa
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1.5
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2
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2.1
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World Trade Volume
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3.2
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4.1
|
4.4
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Consumer Prices
|
Advance Economies
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1.4
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0
|
1.2
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Emerging Economies6
|
5.1
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5.5
|
4.8
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Source: PHD Research Bureau, compiled from IMF
Note: (1) Difference based on rounded figures for both the current and April 2015 WEO Update forecasts. (2) The quarterly estimates and projections account for 90 percent of the world purchasing-power-parity weights. (3) Excludes Lithuania , which joined the euro area in January 2015. (4) The quarterly estimates and projections account for approximately 80 percent of the emerging market and developing economies (5) For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at market prices with FY2011/12 as a base year
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Advanced Economies
In advanced economies have been projected to grow at 2.1% in 2015 and 2.4% in 2016. Amongst advanced economies, growth is being led by Spain at 3.1% in 2015, followed by U.S. at 2.5% in 2015. The unexpected weakness in North America , which accounts for the lion’s share of the growth forecast revision in advanced economies, is likely to prove a temporary setback. The underlying drivers for acceleration in consumption and investment in the US , wage growth, labor market conditions, easy financial conditions, lower fuel prices, and a strengthening housing market, remain intact. The economic recovery in the euro area seems broadly on track, with a generally robust recovery in domestic demand and inflation beginning to increase. In Japan , growth in the first quarter of 2015 was stronger than expected, supported by a pickup in capital investment, however, consumption remains sluggish.
Emerging markets and developing economies
In emerging markets and developing economies are projected to grow at better growth rates of 4.2% in 2015 and 4.7% in 2016. In case of emerging markets and developing economies, growth is being led by India at 7.5%. The slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions—particularly in Latin America and oil exporters, the rebalancing in China , and structural bottlenecks, as well as economic distress related to geopolitical factors—particularly in the Commonwealth of Independent States and some countries in the Middle East and North Africa . In 2016, growth in the region is expected to pick up, largely on account of the projected improvement in economic conditions in a number of distressed economies, including Russia and some economies in the Middle East and North Africa .
Risks to outlook
The distribution of risks to global economic activity is still tilted to the downside. Near-term risks include increased financial market volatility and disruptive asset price shifts, while lower potential output growth remains an important medium-term risk in both advanced and emerging market economies. Lower commodity prices also pose risks to the outlook in low-income developing economies after many years of strong growth.
Policy decisions
At policy front, in many advanced economies, In advanced economies, accommodative monetary policy should continue to support economic activity and lift inflation back to target. Efforts at implementing structural reforms remain urgent across advanced economies, both to tackle crisis legacies and to raise potential output. In emerging market, macroeconomic policy space to support demand is generally more limited but should be used to the extent possible. Structural reforms to raise productivity and remove bottlenecks to production are urgently needed in many economies.
Warm regards,
Dr. S P Sharma
Chief Economist & Director-Research
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