Global Economy in a Holding Pattern - But No Hard Landing Expected

Uncertainty and Volatility Dominate Forecast for 2016 and Beyond as Structural Headwinds Offset New Drivers of Growth

Nov 09, 2015, 12:00 ET from The Conference Board

NEW YORK, Nov. 9, 2015 /PRNewswire/ -- Confined to a slow-growth path for the past five years, the global economy is likely to remain there for the foreseeable future, according to The Conference Board Global Economic Outlook 2016 released today. The report projects global GDP growth of 2.8 percent in 2016, a very modest improvement from 2.5 percent in 2015. By contrast, annual growth rates were routinely above 4 percent in the mid-2000s, and averaged 3.3 percent in 2010-14. Even this low baseline scenario for 2016 faces considerable uncertainty; a substantial confluence of downside risks could sink global growth to as low as 1.9 percent.

"The world's economy is stuck in an uneasy holding pattern," said Bart van Ark, chief economist at The Conference Board and a co-author of the report. "Technology and innovation continue to feed new, potentially transformative forces, but they're offset by slow investment growth, lackluster productivity growth, and an array of stubborn policy and business challenges, from Beijing to Brussels to Brasilia, not to mention inside the Beltway."

Over the medium term, heightened application of technology and innovation will likely improve global growth slightly, to an average of 3.1 percent in the years 2016-20. However, annual growth is projected to slip back down to 2.8 percent in 2021-25, due to aging populations and slow-growing labor forces across the major economies. Global Economic Outlook 2016 includes GDP growth projections and analysis for 11 major regions and 65 individual economies (33 mature and 32 emerging) in all, across three time frames: 2016, 2016-20, and 2021-25.

"The decade of explosive global growth that preceded the Great Recession won't be replicated anytime soon," said Ataman Ozyildirim, director of business cycle and growth research at The Conference Board and another co-author of the report. "Today's pattern instead recalls the 1980s: an extended period constrained by the need to reform and restructure major economies that have reached the limits of their old growth models. For countries and companies alike, strategic decisiveness is key to succeeding in this environment."

Among the key findings:

Aging Labor, Anemic Investment Keep Mature Economies at Low Altitude
Overall, mature economies are projected to grow 2.1 percent in 2016, slightly up from 2.0 percent in 2015. Growth will remain nearly steady over the next decade, averaging 2.1 percent in 2016-20 and 1.8 percent in 2021-25.

  • United States GDP is projected to grow 2.4% in 2016, down from 2.5% (in 2015).
    Continued strength in domestic demand, including stronger household spending on both consumption and housing, will support growth in 2016, despite a strong dollar and weak global demand, which already put downward pressure on corporate profits. More concerning is a "perfect storm" of negative factors - sputtering productivity growth, baby-boomer retirement, and low labor-force participation - that are converging in a major talent shortage. Without offsetting new trends in investment and productivity, growth will fall substantially: to 2.0 percent in 2016-20 and just 1.6 percent in 2021-25.
  • Euro Area GDP is projected to grow 1.6% in 2016, up from 1.4%.  
    The euro area recovery finally gained traction in 2015, driven largely by economies like Spain and Portugal which implemented far reaching economic reforms. Nevertheless, acute political risks remain, including the refugee crisis, Greece's continued fragility, and the potential for Brexit. In the medium term, Europe faces even greater labor-supply shortfalls than the U.S., though this may push it sooner toward a more capital-intensive, productivity-centric growth path. Indeed, Euro Area growth is projected to essentially match the U.S. by decade's end: 1.9 percent in 2016-20 and 1.5 percent in 2021-25.  
  • Japanese GDP is projected to grow 1.2% in 2016, up from 0.6%.
    Significant volatility is likely to continue in Japan, where the economy has contracted in three out of the past six quarters. Weakening household consumption and dependence on external conditions in the Asia-Pacific region add considerable uncertainty and downside risk to the projected doubling of growth in 2016. Looking further ahead, Japanese growth should creep upward and stabilize somewhat: to 1.4 percent in 2016-20 and 1.6 percent in 2021-25.  

Turbulence Reigns in Emerging Markets
At 2.9 percent, growth among emerging and developing economies was less than a percentage point higher than the mature economies in 2015, after routinely outstripping them by 4 or 5 points in the previous decade. This reflects the rush of headwinds - global and local, unavoidable and self-inflicted - buffeting many of the major developing markets. In 2016, overall conditions should improve slightly, with growth in emerging economies expected to rise to 3.5 percent. Improving further, growth should average 4.0 percent in 2016-20, before dropping back to 3.6 percent in 2021-25. 

  • Chinese GDP is projected to grow 3.7% in 2016, unchanged from 2015.
    After years of over-optimistic GDP estimates from Beijing, The Conference Board has adopted new adjustments to Chinese data, which estimate Chinese economic growth at a more realistic 3.7 percent. (See FAQ available here.) Though the same growth rate is expected for 2016, China is one of the major wildcards in this year's Global Outlook. In the wake of the equity bubble popping this summer, a further slowdown is quite possible, especially if rash interventions contribute to further misallocation of capital. Beyond the short-term volatility, however, it's likely that the bulk of China's slowdown has already taken place since 2011, even if unapparent in official statistics. Growth could pick up in the medium term to average 4.5 percent in 2016-20, before dropping to 3.6 percent in 2021-25.
  • Indian GDP is projected to grow 6.2% in 2016, up slightly from 6.1%.
    Through the end of the decade, India's growth is forecast to hover around 6.0 percent, outpacing China's by about 1.5 percentage points. While these macroeconomic fundamentals are solid, to fully leverage its position and improve business sentiment, India needs to increase the pace of government reform and investment - especially around infrastructure, labor-market policy, land acquisition, and the tax regime.
  • Latin American GDP is projected to grow 1.1% in 2016, up from -0.3%.
    Rapidly declining commodity prices have hit the region hard, leading to its first contraction since 2009. The outlook improves slightly for 2016, but annual growth is expected to only rebound to a disappointing 2.4-2.5 percent over the next decade. In general, the major Pacific countries - Chile, Colombia, Mexico, and Peru - are better positioned than their Atlantic counterparts. The Brazilian economy constitutes the biggest uncertainty. While its contraction of 2.2 percent in 2015 is likely to abate, the likelihood of quickly moving back into positive growth territory in 2016 is small, as growth is projected to still be -0.2 percent in 2016.
  • Sub-Saharan African GDP is projected to grow 4.4% in 2016, up from 3.4%.
    While the recent performance of Nigeria and South Africa, the region's largest economies, has disappointed, the region as a whole has weathered the commodity slump better than Latin America and elsewhere. Sub-Saharan African economies still benefit from their economic catch-up potential - an opportunity to deliver high growth from a lower development base. Through 2025, growth is projected to average around 5 percent per year region-wide, offering a bight spot in an otherwise subdued global economic outlook.
  • Southeast Asian GDP is projected to grow 4.7% in 2016, up from 4.6%.
    Stabilizing (though still low) energy prices should provide a silver lining for Southeast Asia's outlook in 2016. Nevertheless, major downside risks remain - including the region's broad-based currency depreciation and growing dependence on China. Through 2020, growth should continue to average 4.7 percent, including 7-9 percent in the least-developed countries like Laos.

For complete details, visit:

Global Economic Outlook | #tcbOutlook16
by Bart van Ark, Abdul Azeez Erumban, Gad Levanon, Ataman Ozyildirim, Andrew Polk, Jing Sima-Friedman, and Klaas de Vries

About The Conference Board Global Economic Outlook
The Conference Board Global Economic Outlook 2016 provides projections for the output growth of the world economy, including 11 major regions and individual estimates for 33 mature and 32 emerging market economies for 2015, 2016, 2016-2020, and 2021-25. The projections are based on a growth accounting model that estimates trend growth as the contributions of the use of labor, capital, and productivity to the growth of GDP. Capital and productivity growth are estimated on the basis of a wide range of related variables during past periods. The trend growth rates obtained from this process are adjusted for possible deviations between actual and potential output.

A description of the methodology, including several adjustments to the estimation model, can be found in Abdul Azeez Erumban and Klaas de Vries, Global Growth Projections for The Conference Board Global Economic Outlook 2016 (The Conference Board, 2015). The most important quantitative change in this year's Outlook is the integration of a new GDP series for China, correcting for the upward bias in the official series. We have also included 10 additional developing countries and enhanced the model estimates to incorporate the impact of globalization on the global outlook. For more information, please visit

About The Conference Board
The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.

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