Lower Oil Prices Boost Prospects for Global Economic Growth

HIGHLIGHTS

• World economy is forecast to expand by close to 3 per cent this year and 3.2 per cent in 2016.
• Most of the world's major economies import millions of barrels of oil per day, including the United States, Europe, Japan, China, and India, and benefit from the decline in world oil prices.
• The U.S. economy is set to expand at around 3 per cent over the next two years.

OTTAWA, April 30, 2015 /CNW/ - Growth in the global economy is expected to pick up slightly this year, mainly due to the stimulus provided by lower oil prices and strength in the U.S. economy.  Overall, the global economy is expected to expand by close to 3 per cent this year, up from 2.6 per cent in 2014, according to The Conference Board of Canada's World Outlook: Spring 2015.

"The world economy is benefiting from lower energy costs which are boosting real incomes and household spending while, at the same time, improving the current account balance of oil importing countries," said Kip Beckman, Principal Economist, The Conference Board of Canada. "However, uncertainty still dominates much of the global outlook, including the threat of deflation in both the eurozone and Japan, and the ongoing conflict in the Ukraine as well as unrest in the Middle East."

Benefiting from solid job growth and the boost to household spending attributable to lower gasoline prices, the U.S. economy is forecast to expand in the 3 per cent range in 2015–16.

The massive quantitative easing program implemented by the European Central Bank, combined with the weak value of the euro, will help prop up growth in the eurozone this year. Still, real GDP growth will remain below 2 per cent. Moreover, double-digit unemployment rates and weak wage increases in many eurozone countries continue to threaten the economic recovery in this region.

Real economic growth in Asia is forecast to expand by about 6 per cent per year in 2015–16. Many of the smaller countries in the region will benefit from weaker currencies and lower energy costs, but the two largest economies in the Asia-Pacific—Japan and China—are struggling to varying degrees. The Japanese economy will eke out a gain of 1 per cent this year. It seems that the new normal for China is growth in the 7 per cent range; but the easing is in part due to government intentionally cooling down the real estate sector.

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SOURCE Conference Board of Canada