Schroders Economic Infographic Dec 2015
The ‘square root’ recovery
• We have trimmed our forecast for global growth in 2016 from 2.9% to 2.6%
• While global demand has held up, there is little momentum and signs of excess
inventory to clear
• Monetary policy is set to diverge with the US and UK tightening whilst policy eases
further in the Eurozone and China
• The benefits from lower oil prices will continue to support consumer spending
Contributions to World GDP growth (year-on-year), %
6
3
2.3%
2.7% 2.5%
3.5%
2
Spain: posted strong
growth of 0.8%
2.6% 2.8%
2.6% 2.5%
1
0
-1
-1.0%
-2
-3
• Growth in Europe lost momentum over Q3, with GDP growth slowing
from 0.4% to a disappointing 0.3%
• The European Central Bank added more stimulus but this was less than
markets expected
• Eurozone recovery continues in 2016, but the external environment drags
on growth
4.7%
5
4
Europe forecast
08
09
10
11
12
13
14
15
16
The US Federal
Reserve (FED)
raised interest
rates for the first
time in nearly
a decade, by
25 basis points
Germany: affected
by a slowdown in
investment. GDP
France: growth picked down to 0.3%
up from a flat second
quarter to 0.3%
17
How will the ‘square root’ recovery affect inflation?
3.7%
Italy: continued to
struggle, recording 0.2%
3.1%
Led by advanced
economies, global
inflation is expected
to rise from 3.1% to
3.7% in 2016
FED rate hikes could
lead to emerging
market defaults. This
would push the
economy in a
deflationary direction
Risk from a potential Inflationary risk from
global push towards a wage acceleration
reflation by
in the US
policy-makers
Key areas to watch out for in 2016
Greece: large drop to
-0.5% caused by recent
crisis
Growth appears to be slowing faster than previously
expected as austerity efforts increase. We have
downgraded our growth and inflation forecast for 2016
BRICs recovery?
Emerging markets are expected to miss out on the majority of the
‘square root’ growth. However, not all BRICs are affected equally
Here are the headwinds and tailwinds to look out for in 2016:
Reforms continue to disappoint
Diverging monetary policy
Fiscal policy
The UK and US tightening policy
as interest rates rise
Canada using fiscal policy
to boost growth
Monetary policy measures will help
growth in the EU, China and Japan
US will likely ease fiscal policy in 2016
Commodity prices
Eurozone may also be supportive,
driven by migrant spending
in Germany
However, some positive change in certain
areas such as gas and price liberalisation
Modest growth driven by consumption
Overcapacity yet to be tackled
Property correction is far from over
However, inflation likely to pick up
in 2016
The positive impact of falling oil
prices may fade in 2016
India
China
Worst of the oil shock may be over
Industrial economy is gradually
recovering
Key:
Consumption still low due to high
unemployment and falling wages
Tailwind
Slight tailwind
Russia
Political situation continues to deteriorate
Headwind
The Global Economy
Unlikely scope for reform without
new government
2016 is set to be another disappointing
year for growth
Brazil
Source: Schroders as at December 2015.
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