niesr press release - feb review global forecast
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8/13/2019 NIESR Press Release - Feb Review Global Forecast
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Press Release
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National Institute Economic Review No. 227 February 2014
EMBARGO 00.01 hours Friday 7 February
NIESRs global economic forecast
The world economy will grow by 3.7 per cent in 2014 and 2015; an improvement on
the 3.1 per cent last year, but still a sluggish recovery by historical standards.
Growth prospects have improved in advanced economies, particularly in the US, but
have deteriorated in a number of emerging market economies.
High unemployment rates coupled with moderate and uneven growth raise the
prospect of continuing below-target inflation. This could greatly complicate
macroeconomic policymaking.
World growth is projected to pick up to 3.7 per cent in the next two years. The outlook hasimproved mainly in the advanced economies, and especially in the United States, but has been
disappointing in the Euro Area and Japan, and has deteriorated in some of the emerging
market economies. Monetary authorities have sought to provide some assurance that the
current supportive policy stance will continue even as the recoveries become more
entrenched. Fiscal policies are also less restrictive than in recent years in most of the advanced
economies.
Inflation in the advanced economies continues to decline. Sustained below-target inflation,
and more so deflation, poses a risk to our projections and could impede recovery in a number
of ways. In particular, adjustment in the Euro Area would be more balanced and less costly if
inflation were at its target on average, and above average in the core countries. With theexception of the US, there has been only a small reduction in private sector debt burdens. This
adjustment would be considerably more difficult in a deflationary environment.
Better growth, very low borrowing costs and little pricing power in goods markets may lead
to further appreciation of asset prices. This could complicate monetary policy stances and the
associated forward guidance. Whether central bankers new tool box of macroprudential
measures can in fact contain such pressures against this backdrop remains to be seen.
A further risk to the Euro Area relates to the design and implementation of the Single
Resolution Mechanism, an integral part of a banking union. It is very difficult to see that the
current proposals are either workable or credible. Until there is real progress on providing apooled public back-stop, it is difficult to see how a credible banking union will emerge. With
bank lending to the private sector already weak, this could be very damaging to prospects for
continuing recovery.
The outlook has worsened in emerging market economies. The gradual slowdown in China is
proceeding broadly as we expected, but near-term growth prospects for Brazil, India, Russia
and a number of other emerging market economies have deteriorated, and financial pressures
have appeared in Argentina, Russia, Turkey, and other countries. Since late October, official
interest rates have been raised in Brazil, India, Indonesia, Turkey and South Africa.
The volatility of capital flows to emerging markets may increase, as an adjustment in
monetary policy in the advanced economies becomes a closer prospect and the financial
imbalances in some emerging market economies are reassessed. Economies with external
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current account deficits that are not financed by long-term capital flows seem particularly
vulnerable. While China is not dependent on external finance, the lack of a robust financial
system poses risks here too.
ENDS
Notes:
The forecast for the world economy is published in the National Institute Economic
Review, no. 227, February 2014.
For a full copy of the world economic forecast or to arrange interviews, please contact
the NIESR Press Office:
Brooke Hollingshead on 020 7654 1923/[email protected]
To discuss the forecast or for interviews, please contact:
Jonathan Portes on +44 (0) 7788 441148/[email protected]
Angus Armstrong 020 7654 1925/[email protected]
The National Institute Economic Review is the quarterly journal of the National
Institute of Economic and Social Research (NIESR). Published in February, May,
August and November, it is available from Sage Publications Ltd
(http://ner.sagepub.com./)[email protected].
Further details of NIESRs activities can be seen on http://www.niesr.ac.uk or by
contacting:[email protected].
For further information:
National Institute of Economic and Social Research
2 Dean Trench Street
Smith Square
London, SW1P 3HE
United Kingdom
Switchboard Telephone Number: +44 (0) 207 222 7665
Switchboard Fax: +44 (0) 207 654 1900
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