Global Economy Predictions of 2015

The global economy is still struggling to gain momentum as many high-income countries continue to struggle with legacies of the global financial crisis and emerging economies. They are less dynamic than in the past. Global growth in 2014 was lower than initially expected, continuing a pattern of disappointing results over the past several years. Growth picked up only marginally in 2014, to 2.6 percent, from 2.5 percent in 2013. Beneath these headline numbers; increasingly divergent trends are at work in major economies.

The U.S. is now in its sixth year of recovery. We’ve powered through one of the worst recessions in memory and fared better than a number of other advanced economies. However, if these five economic trends are any indication according to the World Bank and world Statistics, the U.S. economy is poised to shift into high gear in the coming year.

• The 2015 U.S. economy will likely continue to improve.Growth will likely quicken in the coming year and there is substantial room for improvement in the years ahead—a claim that’s backed by the actions of the Federal Reserve. The Fed has ended its asset purchase program and is now considering an eventual end to its zero interest-rate policy. Additionally a percentage point forecasts the real GDP is about to speed up. From this year’s forecast of 2.5 percent over the four quarters of the year to about 3.5 percent in 2015.
• Interest-rate levels will begin to return to normal.The Fed may start to push its short-term interest rate up towards a more normal 3 to 4 percent level sometime between summer 2015 and summer 2016. U.S. bond yields will go up if that happens, but the rise is expected to be orderly, because forward rates already assume that the Fed will hike, and other key central banks will be slower to move.

International recoveries remain on course. Although economies in Europe and Japan are struggling a bit more than the U.S., they are likely to speed up gradually as their central banks attempt to ease disinflation pressures.

• Employment will likely continue to expand, though the decline in the unemployment rate may slow.Labor market trends—including employment gains and unemployment declines—remain positive, but there are other factors to consider when surveying the true state of employment in the U.S. As economic activity improves, businesses will be able to extend work schedules, and those working part-tme involuntarily will be able to work longer hours. In that case, businesses can meet new demand without hiring more people. Additionally, as those who left the job market earlier return for work, the unemployment rate can be expected to fall gradually, if at all, as those who were not previously reflected in the unemployment rate may rejoin the labor force.
• Internet e-commerce has the potential to transform the retail sector.For now, many Web-only retail services (e.g. those offered by Amazon) are being offered at subsidized prices. As Internet commerce business matures—and businesses learn how to monetize such activity—these subsidies may recede. Businesses may migrate to the more efficient frontier of the Web, meaning that profits and aggregate measures of economic activity can be expected to rise.

Conclusion: Overall, global growth is expected to rise moderately, to 3.0 percent in 2015, and average about 3.3 percent through 2017. High-income countries are likely to see growth of 2.2 percent in 2015-17, up from 1.8 percent in 2014, on the back of gradually recovering labor markets, ebbing fiscal consolidation, and still-low financing costs. In developing countries, as the domestic headwinds that held back growth in 2014 ease and the recovery in high-income countries slowly strengthens, growth is projected to gradually accelerate, rising from 4.4 percent in 2014 to 4.8 percent in 2015 and 5.4 percent by 2017. Lower oil prices will contribute to diverging prospects for oil-exporting and -importing countries, particularly in 2015.