The Global Economy

In 2015, we expect global economic growth to remain unchanged at 3.4 %, which is below the pre-crisis trend growth rate. Global inflation is likely to decelerate to 3.2 % due to the weak trend in commodity prices and the ongoing capacity underutilization.

We anticipate that growth in the industrialized countries will accelerate sharply to 2.3 % with a muted rise of 0.4 % in consumer prices in 2015. Growth in the emerging market countries is expected to decrease to 4.3 % with inflation projected at 5.3 %.

In the eurozone, we predict a moderate rise of 1.3 % in GDP in 2015, supported by the upturn of the global economy, an easing of lending conditions, far lower oil prices and a weaker euro. The continuing geopolitical risks, in particular the Ukraine crisis, and the need to reduce private sector debt levels are likely to have a dampening effect. The moderate growth will probably not be sufficient for an improvement on the job market, and unemployment is expected to persist at an elevated level. We expect consumer prices to decrease by 0.3 % in 2015 due to the weak trend in commodity prices and the capacity underutilization. The extremely expansionary monetary policy of the European Central Bank (ECB) will support the economy with the help of its unconventional monetary policy tools. Starting in March 2015, the ECB will increase its asset purchases to € 60 billion monthly and will add the purchases of bonds issued by euro area central governments, agencies and European institutions to the covered bonds and asset-backed securities purchases. Political uncertainty will remain elevated in the course of 2015 due to the decisive victory of Syriza in the elections in Greece and due to eurosceptic parties likely gaining a larger share of votes in the election in Finland, Portugal and Spain. We predict that the German economy will grow by 2.0 % mainly driven by domestic demand. This is above the eurozone average.

In the U.S., we anticipate above-trend growth of 3.4 % in 2015. The U.S. is therefore likely to be the main growth driver among the industrialized countries. As a result of weak commodity prices and only moderate wage pressure, consumer prices will probably rise by just 0.6 % in 2015. The strong economic growth will be fuelled by the continued upturn on the job market and increased housing-related expenditure. Since households are in good financial shape, this together with the sharp fall in energy costs is likely to stimulate stronger consumption. The Federal Reserve’s monetary policy should provide further stimulus for the U.S. economy. We anticipate that key interest rates will rise in the second half of the year, reaching 1.0 % by the end of 2015. However, real interest rates are likely to remain negative on an annual average.

The Japanese economy is expected to expand by 0.7 % in 2015. Fiscal measures and an extremely expansionary monetary policy are likely to provide further stimulus for growth. Inflation is expected to fall to 0.9 % as the effects of the rise in sales tax ease off and given the weak commodity prices.

We anticipate a decrease in growth in the emerging market countries across all major regions in 2015. Growth of economic activity in Asia (excluding Japan) is expected to decrease slightly to 6.4 % with inflation at 2.9 %. In China, we expect growth to slow to 7.0 % in 2015 with inflation at 1.8 %, primarily as a result of the cooling of the real estate market. A more expansionary monetary and fiscal policy should lead to a moderate rise in growth in the second half of the year. In India, we expect growth to accelerate to 7.5 % in 2015 as investments pick up and consumption increases. Consumer prices are likely to rise by 5.3 %.

In the emerging market economies of Eastern Europe, the Middle East and Africa, we anticipate that growth will slow to 0.6 % in 2015, with consumer prices increasing by 7.5 %. The weak oil price will put pressure on the oil producing countries, with the Russian economy, especially, feeling the effects. We anticipate that Russia will slide into a recession with its economy contracting by 5.2 %. In particular, the sanctions imposed in response to the Ukraine crisis will have a dampening effect. We expect inflation in Russia to be at 13.3 %.

Growth in Latin America is likely to decelerate to 0.7 % in 2015, curbed by restrictions on the supply side and weak commodity prices. Consumer prices are projected to rise by 12.4 %. The Brazilian economy is expected to shrink by 0.7 % in 2015, with consumer prices rising by 7.3 %.

Risks for our forecast include the impending turnaround in U.S. monetary policy, which could prove bumpy and lead to a far greater rise in bond-market rates than we have assumed. This would have a negative impact on the financial markets and could create problems especially for the emerging economies. In Europe, the absence of consensus within the Governing Council of the ECB, the lack of fiscal consolidation and delays in implementing structural reforms as well as increasing support for eurosceptic parties could potentially have a substantial impact on our forecasts. Our outlook for developments in the emerging market countries is subject to three main risks. Demand from the industrialized countries could prove weaker than anticipated, the crisis in the Ukraine could intensify, and China's attempt to cool its economy could lead to a hard landing.