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|Sluggish World Growth Will Continue in 2016|
|Wednesday, 16 December 2015|
Oxford Economics Cuts Global Forecast – Sluggish World Growth Phase to Continue into 2016.
Oxford Economics, the leading independent international forecasting consultancy, has produced its new set of monthly forecasts for the world economy. The December baseline forecast sees the world GDP growth forecast for 2016 reduced to 2.6% from 2.7%, reflecting downgrades in a number of key countries.
Next year’s growth forecast is below consensus and below the long-term average since the early 1980s, both of which stand at 2.8%. So the world will remain stuck in the sub-par growth phase that began in 2011.
Oxford notes that financial markets are ending 2015 on a nervous note with global equities sliding since November, high-yield bonds selling off and oil prices declining.
Lower oil prices will generally be supportive for growth in the advanced economies, and also in China and India. But Oxford has nevertheless downgraded its US and Japanese growth forecasts for 2016 to 2.6% (from 2.7%) and 1.1% (from 1.5%) respectively, in part reflecting weaker incoming data.
Meanwhile, growth prospects in commodity-exporting emerging markets (EM) are not improving. Excluding China and India, we have lowered our 2016 EM growth forecasts to just 1.7%, down from 1.9% previously; and well below G7 forecast growth of 2.1%. This month features another downgrade in Brazil, with GDP now seen slumping 2.6% next year.
Overall, the macroeconomic backdrop for 2016 looks likely to resemble that of 2015 with reasonable G7 growth, a further controlled slowdown in China and weakness in many EMs.
But downside risks remain prevalent: a key concern is that Fed rate rises, weaker commodity prices and rising corporate defaults prompt a more decisive 'turn' in the global credit cycle, feeding back into weaker world growth.
Adam Slater, Lead Economist, Oxford Economics, says, “This month has seen near-term global growth prospects deteriorate with downgrades to forecasts for key countries including the US, Japan and Brazil. Overall, the macroeconomic outlook for next year resembles that of this year but with downside risks still to the fore, particularly related to financial market developments and the risk of tighter credit conditions."
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