Slow but Steady Global Recovery in Need of Strong Policy Support

Global growth forecast at 3.4 percent for 2014—0.3 percent weaker than April projections—and at 4 percent for 2015

Markdown due to one-off factors and slower demand in emerging markets

Risks from geopolitical tensions and higher financial market volatility

Global growth decelerated more than expected in the first quarter of 2014, largely because of temporary setbacks, including a sharp correction to an earlier inventory buildup and the effects of a harsh winter on domestic demand in the United States.

Growth also disappointed in China as policies were tightened to dampen credit growth and housing market activity. Growth moderated in other emerging markets due to softer external demand and also because of slower-than-expected investment growth.

The WEO Update projects that global growth will rebound as the temporary constraints recede and recent policy actions to support expansion gain ground. For example, in China, limited stimulus measures have been deployed to support demand.

Global growth is projected to rise from 3.2 percent in 2013 to 3.4 percent in 2014 and 4.0 percent in 2015. The forecast is 0.3 percent weaker for 2014 relative to the April 2014 WEO (see table), reflecting actual first-quarter outcomes and a slower domestic demand path in emerging markets. For 2015, the forecast is unchanged from the April WEO, as stronger growth in some advanced economies is expected to offset weaker growth in emerging markets.

Advanced economies

Growth in advanced economies is projected to pick up from 1.3 percent in 2013 to 1.8 percent in 2014 and further to 2.4 percent in 2015.

• In the United States, a rebound in activity is already under way, but the recovery will provide only a partial offset to the first-quarter outcome. Growth is projected to average 1.7 percent in 2014, rising to 3 percent in 2015.

• The outlook for the euro area is broadly unchanged compared to the April WEO, but performance will remain uneven across the region. Continued financial and balance sheet difficulties coupled with high unemployment will result in weaker growth in some economies.

• In Japan, growth is projected to decelerate slightly in 2015, mostly due to the planned reversal of the fiscal stimulus that was deployed earlier this year.

Emerging markets and developing economies

Growth in emerging market and developing economies is expected to decline from 4.7 percent in 2013 to 4.6 percent in 2014 and then accelerate to 5.2 percent in 2015 on stronger...