Why global growth is going nowhere

ANZ has lowered its global growth forecasts for 2016 and 2017 amid a number of restrictive cyclical and structural themes playing out across the world economy and warned there could be further downgrades ahead.

"In the near term the risks are skewed to further downward revision."
Warren Hogan, ANZ Chief Economist

Click image to zoom Tap image to zoom

Global growth is now expected to remain more or less unchanged at 3.5 per cent over the next couple of years. The new figure compares to previous forecasts of 4 per cent by 2017.

Additionally, the risks are skewed to further downward revision in the near term, due to factors including  slowing potential growth, still-sizable debt overhang and output gaps in many advanced economies.

The potential for a global manufacturing and/or trade recession, financial liberalisation in emerging markets and ongoing nagging global current account imbalances are also concerns.

Among developed economies the outlook is for steady-to-slightly improving growth. The US is likely to be a standout, expected to grow by around 2.5 per cent in 2015, but it is difficult to see how it can maintain a rate of around 2 per cent over the medium term.

Asian giant China is expected to slow to 6 per cent over the next two years. This would be a respectable outcome for an economy that accounts for nearly one-fifth of global GDP. Japan and Europe are expected to grow between 1 per cent and 2 per cent.

A shift to lower growth is desirable both for China and the world economy. If Chinese authorities tried to resist such slowing it could lead to excessive leverage and asset bubbles. This would in turn be a threat to global economic and financial stability.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks

11 Sep 2015

How to stay the course on China

Leonie Lethbridge | CEO Cambodia, ANZ

The volatility across global markets and data out of China has unsettled many across the region. While the much-feared 'China Syndrome' is a fanciful worst-case scenario for many, what is happening in the Asian giant today is not the catastrophe many believe.

09 Sep 2015

The economy needs more women in construction

Laurice Temple | CEO, National Association of Women in Construction

It is no secret the Australian construction industry is very male-dominated. But what may not be fully understood by the general public is that we don't have any collective overt initiatives and goals in place to increase the participation of women.

01 Sep 2015

Introducing the ANZ Stateometer: Big states pull away from the pack

Cherelle Murphy & Kirk Zammit | Senior Economist & Former Economist, ANZ

There are a lot of data out there telling us about how the economy is going. Building approvals, retail sales, the unemployment rate and consumer confidence are a few of the frequent indicators we are inundated with.