In the backdrop of global economic growth forecast of 2.9%, the Eurozone growth forecast will remain low at 1.1% in 2014 before improving to 1.6% next year. Meanwhile, the UK economy is projected to grow at a robust 3.1% this year and 2.7% in 2015.
In its June forecast, IHS says the growth continues to show a gradual acceleration in global economic activity. World real GDP growth is projected to pick up from 2.5% in 2013 to 2.9% this year and 3.5% in 2015.
Much like 2013, growth at the beginning of this year has been weak—mos tly due to some special circumstances. Matching last year’s pattern, the pace of the recovery is also likely to pick up as the year progresses.
Downward revisions to near-term forecasts for Brazil, China, and the United States marginally outweigh upward revisions to the India and United Kingdom projections. An ongoing concern is that, due to the sluggish pace of the recovery, only a handful of developed countries are now at or above their pre-crisis peak output levels. This lucky group includes Australia, Canada, Germany, Japan, Sweden, and the United States.
The real GDP of the troubled economies of Europe is still far below 2007 levels—a staggering 25% in the case of Greece.
United States, the largely weather-related setback in the first quarter can be ignored. The underlying growth rate of the US economy is in the 2.5–3.0% range, and by most measures economic activity has bounced back in the second quarter. In particular, employment growth has been quite robust. Yet, the IHS forecast of real GDP growth has been revised downward slightly in 2014-16, due to a weaker performance in early 2014 and a more gradual housing recovery. Real GDP is now projected to increase 2.2% in 2014, 3.1% in 2015, and 3.4% in 2016, supported by accelerations in business fixed investment and consumer spending.
European region’s lackluster first-quarter growth masked mixed performances by individual economies: robust growth in Germany and a firming recovery in Spain were countered by stagnation in France, a renewed dip in Italy, and sharp relapses in the Netherlands and Portugal. Recent easing by the European Central Bank will help Eurozone economic activity to gradually firm. Even so, IHS expects Eurozone growth to be limited to 1.1% in 2014 before improving to 1.6% next year. Meanwhile, the UK economy is projected to grow a robust 3.1% this year and 2.7% in 2015.
As the government worries about the slowdown, “mini-stimulus” becomes bigger. While there is evidence that China’s deceleration is ending, the recession in the construction sector remains severe. Industrial production growth has stabilized, while retail sales and export growth have picked up a bit. The central government is cushioning the broad investment slowdown with stimulus measures, including faster deployment of public infrastructure projects and increased public housing construction. Recently, the People’s Bank of China (PBoC) also lowered bank reserve requirements. Because of the deepening construction recession, however, IHS has lowered China’s real GDP growth forecast to 7.3% in 2014 and 7.1% in 2015.
In India, the Bharatiya Janata Party’s decisive election victory will allow Prime Minister Narendra Modi to push forward significant economic reforms. The key area of reform will be tax policy. The new budget will have to balance measures to boost investment and infrastructure spending with continuous fiscal consolidation efforts.
IHS takes a cautiously optimistic view, projecting real GDP to increase 5.4% in fiscal 2014 and 6.2% in fiscal 2015. The news has not been so upbeat in other large emerging markets, where first-quarter growth was either negative (Russia and South Africa) or much slower (Brazil).