Short-term forecast of global real GDP growth
The global economy is recovering following the Great Recession of 2008-2009. In April 2010 the IMF updated global real GDP growth to 4.2% in 2010 and 4.3% in 2011, reflecting confidence about the economic recovery, although there are serious risks related to issues such as sovereign debt in developed nations.
Global economic growth will continue to be characterised by differing rates of recovery across the world in the short-term.
Due to the unexpectedly robust recovery in the global economy, the IMF expects global real GDP growth in 2010 to be 4.2% instead of the 3.9% that was projected in January 2010. Similarly, there has been an upward revision for 2009, estimating that global real GDP shrank by 0.6% instead of the 0.8%, which it predicted in January 2010.
The world recovery has been faster than expected owing to unprecedented government stimulus measures, the speed of recovery in emerging economies that were not so intertwined in global financial market collapse, and a faster than expected pick-up in world trade and the US economy.
Whilst the IMF emphasises the fragility of the recovery in developed markets and highlights risks such as sovereign debt in Western Europe, the Asia Pacific and Africa/Middle East regions will be the main drivers of short-term global GDP growth.
Other downside risks include high and rising unemployment, while global imbalances in terms of major spenders versus big savers are likely to persist unless structural reforms are implemented.
Africa and the Middle East
- Region-wide growth is expected to be strong, reflecting the comparatively mild impact of the global economic recession on most of the Middle East and Africa, despite the sharp downturn in oil revenues. The oil-driven economies of the Middle East are expected to recover strongly in 2010 in line with resurgence in global energy prices. Saudi Arabia, the region’s largest economy, is forecast to grow by 3.7% in 2010 compared to 0.1% in 2009. Thanks to gas revenues and rapid demographic growth, Qatar is expected to remain amongst the quickest-growing economies in the world, with real GDP growth of 18.6% in 2010 and 14.3% in 2011;
- The UAE is subject to a more pessimistic GDP growth forecast in 2010 (1.3% instead of the 2.4% projected in October 2009), due to the Dubai World debt crisis of late 2009, as well as ongoing property and financial problems;
- Nigeria, the region’s most populous country and a major oil producer, is expected to see rapid GDP growth of 7.0% in 2010, higher than the 5.0% projected in October 2009 and a result of a brighter outlook for commodity and oil prices.
Asia Pacific and Australasia
- The short-term economic prospects for virtually all economies in this region have been upgraded. This is partly due to smaller debt levels, more stable financial systems following the Asian Financial crisis of 1997-1998, huge stimulus measures in China, which has also boosted regional trade, and better-than-expected performance in developed markets, which are major export destinations for many Asia Pacific countries;
- China’s growth has not been revised upwards since January 2010, although an ongoing recovery in manufacturing and export-oriented industries will continue to fuel growth. China is expected to be one of the main drivers of the global economy, with real GDP set to increase by 10.0% in 2010 and 9.9% in 2011;
- Japan will struggle the most of the major economies in the region, as it seeks to move out of a deep recession and battles deflation. Growth is expected to be sluggish, at 1.9% in 2010 and 2.0% in 2011, although these forecasts have been upgraded due to the regional improvement and better export performance;
- India’s economy will continue to be a major regional and global driver. Real GDP is forecast to rise by 8.8% in 2010, higher than the 7.7% projected in January 2010, although the IMF highlighted the need for fiscal reform and raised concerns over inflation;
- Azerbaijan is projected to grow more weakly in the medium-term due to lower oil production and the lack of economic diversification, which will weigh on economic growth potential, while nearby Turkmenistan (which is starting from a lower base) is expected to perform strongly (12.0% in 2010) due to an upturn in natural gas prices – the main driver of the economy.
- Eastern Europe has emerged as one of the worst-affected regions in the economic downturn, largely due to banking, property and financial problems as well as weaker domestic demand;
- The Baltic states of Latvia and Lithuania will struggle to emerge from deep recessions, with real GDP expected to contract by 4.0% and 1.6% respectively in 2010. Banking and property markets have been badly affected, while state debt levels are worrisome. Hungary will also remain in recession in 2010, though a more shallow one (0.2% contraction);
- Russia has emerged in a more resilient state than previously expected, with real GDP growth expected to rise by 4.0% in 2010 compared to the 3.6% expected in January 2010. This is largely due to the rebound in commodity prices. Romania is expected to bounce back sharply between 2010 and 2011 after macroeconomic stabilisation aided by an IMF/EU/World Bank loan.
- The IMF has upped its forecasts for The Americas given the stronger global economic recovery and the impact of a major economic stimulus package in the USA in 2009. The USA has seen its growth forecast increased to 3.1% for 2010 compared to the 2.7% that was forecast in January 2010. Growth in 2011 is expected to be 2.6%, possibly due to the expected ending of economic stimulus;
- The IMF has significantly downgraded its forecast for Venezuela, which is now expected to see real GDP contract by 2.6% in 2010 compared to the previously forecast -0.4%. This is due to lower private-sector activity and government efforts to nationalise certain industries. Power shortages and infrastructure problems are also having an adverse effect on economic growth as is high inflation;
- Mexico’s economy is expected to take an upward trajectory rising by 4.2% in 2010 and 4.5% in 2011. Its economy is closely related to that of the USA, given the significant trade and labour links between the two countries;
- Similarly, Brazil’s prospects for the short-term have improved due to higher commodity prices, private investment and stronger than expected domestic consumer demand. Growth is expected to be 5.5% in 2010. The IMF projects that Peru will perform the best in the region in 2010 due to a positive commodity price outlook and sound macroeconomic management.
- Western Europe is expected to experience the slowest GDP growth of all regions in the short-term. Many countries were badly affected by the financial crisis and have been reliant on government stimulus programmes. Germany, the region’s largest economy, is expected to be less resilient than originally thought. The IMF projects 1.2% real GDP growth in 2010 compared to the 1.5% forecast in January 2010, due to a slower than expected recovery and comparatively weak consumer demand;
- Forecasts for the UK have remained unchanged since January 2010, at 1.3% for 2010. However, political uncertainty amid the elections and fears of a hung parliament in May 2010, together with imminent public spending cuts will weigh on economic growth;
- The October 2009-April 2010 period has seen the emergence of the Greek debt crisis, and the IMF downgraded Greece’s real GDP forecasts from -0.1% to -2.0% in 2010 projecting that the country will remain in recession in 2011. An EU bailout announced in April 2010 may help to improve this outlook;
- Ireland will continue to be in a relatively deep recession in 2010 as it bears the brunt of severe problems in the banking and property markets, as well as cuts in public spending. Real GDP is expected to contract by 1.5% in 2010, with growth of 1.9% in 2011. Spain will also remain in recession (-0.4% in 2010), with extremely high unemployment and concerns over government debt and worries in the construction and tourism industries.