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Global Economic Prospects January 2015

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Global Economic Prospects January 2015

Having Fiscal Space and Using It

World Bank,

15 min read
10 take-aways
Audio & text

What's inside?

All nations, especially developing countries, should rebuild their fiscal buffers as protection against economic shocks.

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Editorial Rating

7

Qualities

  • Comprehensive
  • Analytical

Recommendation

This flagship report by the World Bank Group (WBG) predicts that the global economy will experience a lackluster recovery through 2017, with low oil prices and a patchy revival in high-income countries supporting relatively meager growth. In this meticulously researched, reader-friendly and well-annotated analysis, the WBG cautions that developing nations must expand their limited “fiscal space” to help them adapt to the changing economic environment. The WBG’s analysts include essays on fiscal policies, the implications of cheap oil for developing countries, global trade trends and the importance of worker remittances. Tables, graphs, figures and a statistical annex support each part of the report and feed into a central thesis: Economic risks abound, and nations will fare best that act now – while oil prices are low – to strengthen their fiscal buffers against future shocks. getAbstract recommends this timely, comprehensive and nuanced report to investors, risk managers, policy makers, analysts, decision makers in business and industry, and development executives at nongovernmental organizations.

Summary

Growing Pains

With weaker trade prospects, an impending rise in global interest rates and financial markets that still suffer the aftereffects of the 2008 crisis, global economic growth will be a modest 3% in 2015, averaging 3.3% to the end of 2017. Developing economies will fare best, with an average GDP growth rate of 4.8% in 2015, rising to 5.4% by 2017. Developed economies will edge up 2.2% from 2015 to 2017.

Projections indicate that US growth will rise to 3.2% in 2015 but will slow to just 2.4% in 2017. The euro zone will struggle as it copes with continuing high unemployment, fiscal issues and constrained bank lending. Expect European GDP growth of just 1.1% in 2015, rising to 1.6% in 2016 and 2017. Meanwhile, China’s advance will slow from 7.4% in 2014 to less than 7% by 2017 as it manages excess capacity and tamps down credit growth. The major economies’ less-than-impressive growth prospects will have important implications for the developing world and will frame international fiscal policy debates.

For oil-importing countries, the sharp drop in global fuel prices could help offset the impacts of weaker trade and rising interest rates. However, the converse...

About the Author

The World Bank Group provides financial and technical assistance to developing countries.

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