The global economy in pictures Mar 2016
Downward drift across the global economy
Central bank forecasts
Growth continues, but our forecasts have drifted towards a world of weaker growth and lower inflation
Global growth forecast trimmed for 2016, led by
downgrades to the US, Japan and
Emerging Markets (EM)
Inflation downgrade for developed markets to
reflect lower oil prices, EM inflation upgrade from
currency depreciation
Inflation
GDP growth
7
9
6
8
5
4
3
2
1
3.6
3.4
2.4
1.8
4.4
2.8
1.9
2.4
8.7
7.6
7
6.7
6
5
3.9
4
1
-2
2.0
1.0
2
-1
3.7
3.0
3
1.7
0
In this uncertain economic
environment, governments will need
to respond and central banks can
and will need to do more
The Federal Reserve (FED):
rate rises delayed (not dodged)
FED
0.2
0
-1
-3
2015
2016
Emerging
markets
Overall
growth
2017
2015
2016
2017
For 2017, we believe growth will strengthen due
to more stable emerging market activity
Developed
markets
The Bank of Japan (BoJ):
expect cuts
Europe: comfort in an uncertain world
BoJ
Europe continues to generate solid and steady growth with acceptably low political risk
The 2016 eurozone GDP forecast has been revised
from 1.5% to 1.4%, but our 2017 forecast
remains unchanged
GDP growth
3.5
Inflation
3
1.9
1.9
2.5
2
1.6
1.5
1
Eurozone inflation forecast for 2016 is set at 0.7%
due to low oil prices
1.5
1.5
0.5
0
0
-0.5
-0.5
-1
-1
2015
2016
UK
2017
2.0
1.6
2
0.8
1
1.4
0.5
0.1
0.0
2015
2016
The European Central Bank (ECB):
expect cuts
ECB
0.7
2017
Our forecast for UK GDP growth is set fairly cautiously due to
Brexit uncertainty and the resumption of austerity
Europe
BoE
China: a slowdown due to low oil prices and currency depreciation
Brazil: a fall in GDP in 2016, followed by positive growth in 2017 as the economy begins to recover
India: continued acceleration, but the quality of both the growth and data behind “2015’s fastest
growing major economy” could be questionable
Russia: the worst of the oil shock is over, leading to a forecast of positive (but weak) growth for 2017
GDP growth
7.0
7.5
6.9
6.3
7.9
7
6
5
6.2
11
10
9
8
4
7
3
6
2
-0.7
1
0
-1
-2
-3
-4
1.5
5
1.0
3
2016
China
Russia
9.0
5.0
1.5
2017
Brazil
-1
India
2015
BoE expected to be
cautious, delaying
hikes until November
and then moving only
twice, taking rates to
1% in February 2017
Inflation
8.0
7.8
0
-2.8
2015
+15
4
2
1
-3.7
15.3
ECB likely to cut rates
further before end of
year with the deposit
rate falling to -0.5%
The Bank of England (BoE):
more cautious
BRICs: has a base been reached?
8
BoJ expected to cut
rates to -0.25% by end
of 2016 and -0.5% by
end of 2017
3.5
3
2.5
FED expected to delay
suspected March rate
hike to June and
December due to
weaker global growth
5.4
6.8
5.3
2.1
1.9
2016
2017
People’s Bank of China (PBoC):
expect cuts
PBoC
PBoC cut the reserve
requirement ratio*
last month, which is
expected to be
followed by a further
2% this year alongside
rate cuts
*Reserve requirement ratio is the portion (expressed as a percent) of deposits which banks must have on hand as cash. This is a requirement determined by the country’s central bank.
Source: Schroders as at March 2016.
Important Information: Any security(s) mentioned above is for illustrative purpose only, not a recommendation to invest or divest. This document is intended to be for information purposes only and it is not
intended as promotional material in any respect. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Opinions stated are matters of judgment, which may
change. Information herein is believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy. Investment involves risks. Past performance and any
forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. Exchange rate changes may cause the
value of the overseas investments to rise or fall. For risks associated with investment in securities in emerging and less developed markets, please refer to the relevant offering document. The information contained
in this document is provided for information purpose only and does not constitute any solicitation and offering of investment products. Potential investors should be aware that such investments involve market risk
and should be regarded as long-term investments. Derivatives carry a high degree of risk and should only be considered by sophisticated investors. The fund is authorized by the SFC but such authorization does
not imply official approval or recommendation. Schroder does not provide any securities or investment products for offer, solicitation or trading within The People’s Republic of China (PRC). Should illegitimacy arise
thereof, contents of this document shall not be construed as an offer or solicitation or trading for such securities or products. All items mentioned herein are sold through financial products issued by commercial
bankers in the PRC under regulations by the China Banking Regulatory Commission (CBRC). Investors should read the relevant documents clearly before invest in the mentioned funds. Please consult the relevant
commercial bankers in the PRC and/or professional consultants if necessary. This material including the website has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.
Schroder Investment Management (Hong Kong) Limited
Level 33, Two Pacific Place, 88 Queensway, Hong Kong
Telephone +852 2521 1633 Fax +852 2530 90950316/CNEN