The global economy is projected to grow by 3.5% in 2015, almost unchanged from 2014, but with impetus from advanced economies. In contrast, economic performance is falling short of expectations in many emerging markets, including MENA oil-exporters.
Global growth is projected to remain broadly unchanged in 2015 at 3.5%, but to accelerate to 3.8% in 2016, with lower oil prices boosting global output between 0.5% to 1% over the period, according to the International Monetary Fund’s April World Economic Outlook.
The prospects, however, showed divergent trends among various regions. In particular, economic activity in 2015 is expected to be stronger in advanced economies, but weaker in emerging markets for the fifth consecutive year. Already, growth in the US was stronger than expected in the last three quarters of 2014, coming in at an average of 4%, with consumption buoyed by a fall in unemployment to 5.5%, income growth, lower oil prices, and improved consumer confidence, according to the IMF.
Similarly, the economies of the Euro area showed signs of recovery in the final quarter of 2014, driven by lower oil prices and higher net exports. The IMF revised upwards its projections for the region’s growth by 0.3% to 1.5% in 2015, as activity accelerates in France, Spain, and Italy.
On the other hand, the economies of China and Brazil are all seen decelerating during the year. Growth in China is expected to slow to 6.8% and 6.3% in 2015 and 2016 respectively from 7.4% in 2014. A real estate correction, following a boom in 2009-12, dampened investment growth in the second half of 2014. Additional slowdown is expected in the real estate sector and in most sectors, stated the IMF.
The IMF sharply revised downwards its forecasts for Brazil’s economy which is now seen entering into recession in 2015, citing weak private sector sentiment. Output is projected to contract by 1% in 2015, more than 2% below the October 2014 forecast on the back of unaddressed competitiveness challenges, the risk of near-term electricity and water rationing, the fallout from the Petrobras investigation, and greater-than-expected need for fiscal tightening.
Fuel prices falling further
Fuel prices are expected to remain relatively subdued in 2015 on continued mismatches between demand and supply by both OPEC and non-OPEC members, according to the IMF. Slowing demand growth from China and significant increases in the supply of most metals will likely keep commodity prices in check in 2015 and 2016. At the same time, food prices, excluding meat, are projected to fall by 16% in 2015 and by another 3% in 2016 on the back of strong harvest seasons for most crops, stated the IMF.