No significant rebound in global growth in 2015
Global GDP growth is unlikely to rebound significantly in the next two years, as a gradual slowdown in the Chinese economy and structural impediments in the euro area, Brazil and South Africa continue to weigh on economic activity, Moody’s Investors Service said in its quarterly Global Macro Outlook report.
For the G20 economies as a whole, the rating agency expects GDP growth of around 3% in 2015 and 2016, after 2.8% in 2014.
“Most factors that have weighed on global GDP growth in 2014 will remain in place in the next two years, including the gradual slowdown in China,” said Marie Diron, a author of the report. The latter has led to a very sharp deceleration in its imports and has dampened export growth globally.
“Moreover, structural deficiencies in some countries and regions - including the euro area, Brazil and South Africa - are also preventing a significant rebound in growth,” continued Diron.
These domestic factors are impinging on economic activity to a greater extent than previously envisaged and have driven a downward revision in Moody’s 2015 forecasts for many countries and regions, including the euro area, Japan and Brazil. In contrast, Moody’s expects sustained robust growth in the US, UK and India over the next two years.
Moody’s expects robust growth in the US over the next two years (+3% and +2.8% in 2015 and 2016 respectively), as strong job creation and favourable financing conditions create an environment conducive to realise pent-up demand for consumption. Meanwhile, strong profits and low external financing costs will continue to foster investment by US companies, whilst relatively brighter growth prospects in the US will tend to favour investment at home rather than abroad.
In Brazil, slower exports to China have exacerbated underlying weaknesses and drive Moody’s GDP growth forecasts of around 1% in 2015. An elevated level of government debt limits the room for fiscal stimulus measures, whilst high inflation constrains the central bank’s ability to ease monetary policy in support of growth and hampers purchasing power and consumption. Moreover, underinvestment has resulted in deficient infrastructure. Reforms to address these deficiencies will take time to come to fruition and hence have a limited visible effect on GDP growth over the next two years.