Global Growth Revised Down, Despite Cheaper Oil, Faster U.S. Growth

  • Global growth forecast at 3.5 percent for 2015, revised down by 0.3 percent
  • Net benefit of plunge in oil prices more than offset by adverse factors
  • Risks to global growth more balanced thanks to upside risks of lower oil prices
  • Global growth is forecast to rise moderately in 2015–16, from 3.3 percent in 2014 to 3.5 percent in 2015 and 3.7 percent in 2016 (see table), revised down by 0.3 percent for both years relative to the October 2014 World Economic Outlook (WEO).

    Recent developments, affecting different countries in different ways, have shaped the global economy since the release of the October WEO, the report says. New factors supporting growth—lower oil prices, but also depreciation of euro and yen—are more than offset by persistent negative forces, including the lingering legacies of the crisis and weak investment as many countries adjust to lower potential growth.

    “At the country level, the cross currents make for a complicated picture,” says Olivier Blanchard, IMF Economic Counsellor and Director of Research. “It means good news for oil importers, bad news for oil exporters. Good news for commodity importers, bad news for exporters. Continuing struggles for the countries which show scars of the crisis, and not so for others. Good news for countries more linked to the euro and the yen, bad news for those more linked to the dollar.”

    Cross currents in global economy

    In advanced economies, growth is projected to rise to 2.4 percent in both 2015 and 2016. Within this broadly unchanged outlook, however, is the increasing divergence between the United States, on the one hand, and the euro area and Japan, on the other.

    For 2015, the U.S. economic growth has been revised up to 3.6 percent, largely due to more robust private domestic demand. Cheaper oil is boosting real incomes and consumer sentiment, and there is continued support from accommodative monetary policy, despite the projected gradual rise in interest rates. In contrast, weaker investment prospects weigh on the euro area growth outlook, which has been revised down to 1.2 percent, despite the support from lower oil prices, further monetary policy easing, a more neutral fiscal policy stance, and the recent euro depreciation. In Japan, where the economy fell into technical recession in the third quarter of 2014, growth has been revised down to 0.6 percent. Policy responses, together with the oil price boost and yen depreciation, are expected to strengthen growth in 2015–16.

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