ONU OKORIE writes that IMF rated economic outlook in 2015 low
International Monetary Fund, IMF, has rated the global economic output for 2015 as low compare to what obtained in the preceding year 2014. Result of the survey conducted by the world economic institution and obtained from the website during the weekend stated that the global output growth in 2015 remained weak.
According to the IMF World Economic Outlook for 2015, the estimated output growth of 3.1 per cent was 0.3 per cent lower than the 3.4 per cent recorded in 2014. The decline was attributed to the general slowdown in economic activities in emerging markets and developing economies, China’s rebalancing of economic activities away from investment and manufacturing to consumption and services, declining oil and other commodity prices and the gradual tightening of US monetary policy.
In advanced economies, the 2015 output growth estimate was revised downward to 1.9 per cent from the earlier projection of 2.1 per cent, slightly above the 1.8 per cent recorded in 2014. The modest rebound in output reflected primarily a strengthening of recovery in the euro area and a gradual return to growth in Japan. Other contributory factors include declining oil prices, accommodative monetary policies and currency depreciation. The pickup in output is expected to continue in 2016, particularly in North America. Output growth in advanced economies is projected at 2.1 per cent in 2016, which is 0.2 per cent higher than in 2015.It is, however, anticipated that this projected recovery could be dampened by downside risks.
Output growth in the US was expected to increase slightly from 2.4 per cent in 2014 to 2.5 per cent in 2015, despite strong second quarter growth of 3.9 per cent. The marginal rise in output growth in the US economy was attributed to decline in oil prices, fall in the unemployment rate, weakened inflationary pressures, dollar appreciation, and increased household spending and industrial activities.
In the euro area, output growth was 1.5 per cent in 2015, compared to 0.9 per cent in 2014, reflecting sustained recovery supported by stronger private consumption, lower oil prices and easing financial conditions that outweighed a weakening in net exports. In 2016, the euro area is expected to expand by 1.7 per cent. In the UK, growth weakened from 2.9 per cent in 2014 to 2.2 percent in 2015 and was estimated to remain at the same rate in 2016.
In Japan, output growth rose to 0.6 percent in 2015 from its zero-growth level in 2014. This reflected the rebound in domestic spending arising from quantitative and qualitative policy measures adopted during the review period.
Output growth in emerging markets and developing economies was estimated at 4.0 per cent in 2015, compared to 4.6 per cent recorded in 2014. The slowdown in output growth reflected difficult external conditions, sharp rise in financial market volatility, declining commodity prices and downward pressure on many of their currencies. Other factors were low capital inflows and the effect of the lift-off of US policy rates from the zero lower bound. Growth in China slowed to 6.9 per cent in 2015 from 7.3 per cent in 2014, reflecting, among others, the decline in investment growth and weak exports.
In Latin America, the economic downturn in Brazil was deeper than expected, and with declining commodity prices, the momentum continued to weaken in other countries in the region. Output growth in Brazil decelerated to -3.8 per cent in 2015 from 0.1 per cent in 2014. Mexico’s growth of 7.5per cent in 2015 was lower than expected, reflecting slower US growth and a drop in oil production.
In Russia, output growth declined from 0.6 per cent in 2014 to -3.7 per cent in 2015, owing largely to declining commodity prices and the political turmoil in the region. The output growth in India, at 7.3 per cent in 2015, the same as in 2014, was supported by a strong expansion in the manufacturing and services sectors.
The Middle East and North Africa (MENA) region witnessed a decline in output growth from 2.8 per cent in 2014 to 2.5 per cent in 2015, owing to low oil prices and political instability in several countries.
Also, output growth in sub-Saharan Africa (SSA) in 2015 was lower than projected, as it declined to 3.5 per cent from the 5.0 per cent recorded in 2014. This was largely attributed to the fall in crude oil prices, which affected oil exporting countries like Nigeria and Angola. GDP growth in South Africa was estimated at 1.3 per cent in 2015 compared with 1.5 per cent in 2014, while in Nigeria it was estimated to decline to 3.01 per cent in 2015 from 6.3 per cent in 2014.
Global inflation generally remained low throughout 2015, reflecting the continued decline in oil prices and low aggregate demand. For most part of 2015, inflationary pressures remained relatively low in China and advanced economies, but rose slightly in several emerging markets and developing economies.
In the advanced economies, headline inflation fell to 0.3 percent in 2015from 1.4 per cent in 2014, owing to the sharp decline in commodity prices and the hedging downwards of market-based measures of inflation expectations. Core inflation remained stable at low levels, reflecting persistent economic slowdown and weak import prices, particularly in the US where the effective exchange rate had appreciated by about 15 per cent over the past year. Core inflation is expected to remain weak in 2016, but could edge up marginally if economic conditions improve. Inflation in advanced economies was projected at 3.7 per cent for 2016. Inflation in the US which was 1.6 per cent in 2014, dropped to 0.1 per cent in 2015 but is expected to rise to 1.1 per cent in 2016 as the Federal Reserve raises interest rates. Overall, the inflation rate in most advanced economies remained below their respective central banks’ targets for 2015.
In the euro area, inflation declined to 0.2 per cent in 2015 from 0.4 per cent in 2014 but is expected to rise to 1.0 per cent in 2016, as economic conditions improve. Similarly, inflation in the UK moderated to 0.1 per cent in 2015 from 1.5 per cent in 2014 and is projected to rise to 1.5 per cent in 2016. Inflation in the euro area, however, remained within the European Central Bank (ECB) target of 2.0 per cent for 2015.
In Japan, inflation declined from 2.7 per cent in 2014 to 0.7 percent in 2015 and is estimated to decline further to 0.4 per cent in 2016.
Inflation in the emerging markets and developing economies rose from 5.1 per cent in 2014 to 5.6 per cent in 2015 but is expected to slow down to 5.1 per cent in 2016. In China and India it remained subdued, while in Brazil and Russia inflation was elevated as currency depreciations pushed up import prices. During the review period, the average inflation rate of emerging markets and developing economies at 5.6 per cent was higher than the 3.0 per cent inflation target of many of their central banks and the 5.5 per cent recorded in 2014.