Global Economic Growth to Remain Tepid in 2015

Hopes are fading fast that the growth rate for the global economy can accelerate in 2015 as had been expected.  This is due to the fact that, apart from the United States and a handful of other countries, economic growth in the developed world remains weak.  In addition, while China, India and other Asian emerging markets are growing at a solid pace, large emerging markets in Latin America and East Europe are struggling to grow at all, while countries such as Russia, Argentina and Venezuela are facing deep recessions.  As a result, 2015’s overall global economic growth rate will look much like that of recent years.

Over the past three years (2012-2014), the global economy has expanded at a rate of just 3.3% per year and this growth rate has remained remarkably steady during this period.  Since last year, the United States, Britain and other English-speaking developed economies such as Canada and Australia have recorded higher rates of growth and this growth is forecast to continue in 2015 and the following years.  However, this solid performance by the English-speaking developed world as been offset by the continued struggles of the Eurozone’s economy and the sharp decline in growth in Japan.  As a result, overall economic growth rates for the developed world remained below 2.0% in 2014, meaning that economic growth in the developed world has only averaged 0.8% over the past seven years, its worst performance since World War Two.  In 2015, the developed world is forecast to grow by just 1.2%, another poor performance.

In the emerging world, economic growth rates have continued to exceed that of the developed world.  However, major gaps have developed between the world’s leading emerging economies.  For example, while economic growth rates in emerging Asia have fallen from their double-digit highs of the years before the global financial crisis, emerging Asia’s economy continues to grow at more than 6% per year, a respectable performance.  In contrast, emerging markets in Latin America and East Europe have fallen on very hard times in recent years and these struggles are forecast to continue in 2015.  In Latin America, economic growth rates failed to reach 3% in both 2013 and 2014 and this region’s overall economic growth rate might fall below 1% in 2015 as Brazil and Mexico continue to underperform and Venezuela and Argentina face severe recessions.  In East Europe, the conflict in Ukraine, together with falling oil prices, will result in a severe recession in Russia in 2015 (as well as in Ukraine).  Moreover, other East European economies that depend upon West European export markets have also struggled to grow in recent years and this trend will continue in 2015.

Overall, there are not enough engines of economic growth to support a significant increase in global economic output in 2015.  As a result, we are forecasting a fourth consecutive year in which the global economy grows by around 3.3%.  On one hand, the United States and other English-speaking developed economies will remain the key driver of growth this year, but even with a combined population of 440 million, this will not be enough to lift global economic growth rates to pre-crisis levels.  Likewise, Asia’s giant emerging markets will continue to grow at a respectable level, but the days of double digit growth rates in China are over, and the region’s other emerging markets are not large enough to significantly influence the global economy.  Finally, the Eurozone’s and Japan’s economic struggles will continue in 2015 as domestic demand in both markets (combined population of 460 million) will remain subdued due to demographic decline and returning deflationary pressures.  Altogether, the global economic outlook for 2015 looks a lot like that of the previous three years, with a just a slight change in the key drivers of global economic growth.