Global outlook – Cautious optimism warranted
The global economy should grow a little faster in 2016 and 2017 than in 2015. Key to that view is that advanced economies maintain their growth momentum, while emerging economies will be able to cope a little better with the challenges presented to them in 2015. China’s gradual slowdown will continue, but its negative effects on the rest of the world economy will ease. Commodity markets have undershot and some stabilisation of prices or perhaps even a modest recovery is our main scenario for 2016. Financial stress in emerging economies is one of the key risks, but we expect policymakers to stay in control.
Eurozone – Domestic demand strengthens
Domestic demand in the eurozone is gathering momentum, while net exports will be modestly positive for GDP growth in 2016 and 2017. We see growth picking up to almost 2% in 2016 and somewhat above 2% in 2017. Inflationary pressures remain subdued and further ECB easing is on the cards. The euro will depreciate significantly against the dollar in 2016, whereas the EUR/USD is expected to rise again in 2017.
US – Good-bye zero interest rate policy
The US economy is solid enough to cope with a rate hike after seven years of near zero interest rates. Slack has been diminishing and this is likely one of the major reasons why we think the Fed will hike in December. Still, the current soft inflation and the recent volatility in global financial markets call for a slow pace of rate hikes in 2016 and 2017.
Emerging Asia – China, world trade and Fed shape 2016 outlook
Asia outperforms other emerging regions by a wide margin. Still we expect regional growth to fall marginally in 2016-17, driven by a gradual slowdown in China. With inflation at low levels, there is still room for monetary and fiscal stimulus.
Emerging Europe – Growth set to return in 2016
The outlook for emerging Europe has improved. Following a deep crisis, Russia should grow very modestly next year. Meanwhile, the economies in Central Europe should continue to propel ahead.
Latin America – The worst seems to be over
Reviving exports in the course of 2016 will kick-start a cautious economic revival. But persisting structural problems and the impact of restrictive economic policies will continue to thwart an exuberant recovery.