Global Economy Set to Improve Marginally

By an IPS Correspondent Reprint | | Print |

New York, Dec 10 2014 (IPS) - Over the next two years, global economic growth is expected to increase marginally, according to a new U.N. report released Wednesday.

The report, World Economic Situation and Prospects 2015 (WESP), said the world economy will grow 3.1 per cent in 2015 and 3.3 per cent in 2016, compared with an estimated growth of 2.6 per cent for 2014.

During 2014, the global economy expanded at a moderate and uneven pace. Legacies from the global financial crisis continue to weigh on growth, while new challenges have emerged, including geopolitical conflicts such as in Ukraine and the Ebola epidemic, the report said..

Unemployment figures remain historically high in some regions, but appear to have stopped rising. While global inflation remains subdued, the spectrum ranges from deflation risks in the euro area to high inflation in some developing countries.

Foreign direct investment inflows have remained the most stable and relevant source of financing for developing countries whereas portfolio capital flows are highly sensitive to changes in risk appetite.

Trade growth is expected to pick up moderately with the volume of world imports of goods and services projected to grow by 4.7 per cent in 2015. In 2015, fiscal tightening in most developed economies will continue, although the pace of tightening is expected to slow.

The report predicted the US dollar will remain the dominant trend on foreign exchange markets.

“While some economic indicators are positive and moving in the right direction which points to the potential for a gradual return to consistent economic growth,” said Pingfan Hong, Director of the Development and Policy Analysis Division for the UN Department of Economic and Social Affairs, “many risks and uncertainties could dash efforts to get the global economy on track and moving forward.”

Among the developed economies, while the US maintained an annual growth rate above 2 per cent in 2014, the economic situation in Europe has been precarious, particularly in the euro area, where a number of euro members teetered on the brink of recession.

In Japan, momentum was generated by a fiscal stimulus package and monetary easing from 2013 tapered off in 2014.

The US economy is expected to improve in 2015-2016, with GDP projected to expand by 2.8 and 3.1 per cent, respectively.

Only a slight improvement in growth is expected in Western Europe. The region is held back by the travails of the euro area, where the level of GDP has yet to regain its pre-recession peak.
A projected slowdown in Japan is mainly attributed to the drop of private consumption due to a higher consumption tax.

Growth rates in developing countries and economies in transition diverged more during 2014, as a sharp deceleration occurred in many large emerging economies, particularly in Latin America and the Commonwealth of Independent States (CIS).

In contrast, East Asia, including China, experienced only a mild slowdown, while India led South Asia to a moderate uptick.

Among the developing countries, Africa’s overall growth momentum will continue, with GDP growth expected to accelerate to 4.6 per cent in 2015 and 4.9 per cent in 2016.
East Asia will remain the fastest-growing region, and is projected to see stable growth of 6.1 per cent in 2015 and 6.0 per cent in 2016.

Economic growth in South Asia is set to gradually pick up, while economic growth in Latin America and the Caribbean is projected to moderately improve.
In the CIS, prospects are weak with near-zero growth expected in the Russian Federation.