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- Title
World Economic Prospects.
- Abstract
Overview: Global revisions to potential growth Our world GDP growth forecasts are unchanged this month at 2.2% for 2016, which would be the lowest since 2009, and 2.6% in 2017., Short-term activity indicators have been mixed. The global PMI rose to an eight-month high in September, but growth remains subdued compared with its long-term average. In addition, other high-frequency data such as the Citigroup economic surprise indices have been trending down since August., Indicators of international trade continue to show signs of weakness: the volume of world trade fell 1.1% on the year in July and was flat in the seven months to July. That said, the latest data for some countries show a pick-up in trade volumes in August, particularly in Asia., The recent shift in monetary policy in Japan means that we now see yields on 10-year Japanese bonds capped at 0% until 2020., We have lowered our forecast for GDP growth in the US in 2017 from 2.3% to 2% given weaker momentum in the private sector, particularly consumption and investment., Activity in the UK continues to surprise to the upside, therefore supporting our above-consensus call on UK growth (1.9% this year and 1.2% in 2017). But sterling is bearing the brunt of the adjustment, falling to new lows against most major currencies. This has led us to revise our end-year GBP forecasts to 1.25 to the US$ and 1.12 to the euro (from 1.28 and 1.19 last month)., This month we have reviewed our long-term forecasts. A weaker outlook for capital accumulation and productivity growth means the Eurozone and the UK have seen their potential growth cut by 0.2% a year over the next decade. In Japan, Abe's policies should alleviate the worst of the demographics slowdown, but this still results in potential growth of only 0.4% a year., Lower growth in the Eurozone and the UK has consequences for interest rates as well. We now do not expect the ECB to start raising the refinancing rate until early-2020, and see it peaking at 2.75% in 2028 (versus 3% in 2025 previously). In the UK, the BoE terminal rate has been cut to 3.5% (from 3.75%). Also, our expected path for 10-year bond yields has flattened significantly in most Eurozone countries.
- Subjects
JAPAN; UNITED States gross domestic product; INTERNATIONAL trade; MONETARY policy; ECONOMIC forecasting; POPULATION forecasting; INTERNATIONAL economic relations; CHARTS, diagrams, etc.
- Publication
Economic Outlook, 2016, Vol 40, p1
- ISSN
0140-489X
- Publication type
Article
- DOI
10.1111/1468-0319.12240