Global Economic Outlook 2014,
February 2014 update
Slow Global Growth to See a Rebound in 2014
Faster Increase in Public and Private Investment and Policy Reform to Drive Productivity Can Counter Long Term Slowdown
- Global growth of Gross Domestic Product (GDP), adjusted for inflation, will rebound from 2.9 percent in 2013 to 3.5 percent in 2014 – a slight upward revision from our projection of 3.1 percent, last November.
- Across mature economies, the 2014 growth outlook has improved significantly to 2.2 percent growth in 2014, compared to 1.3 percent in 2013.
- The uptick is primarily due to the United States, which is expected to increase its growth by more than 1 percent, from 1.9 percent in 2013 to 3 percent in 2014.
- The recovery of Eurozone from its negative growth of -0.3 percent in 2013 to 1 percent in 2014 also contributes to this improvement in mature economies.
- GDP growth in emerging and developing economies as a whole is projected to improve slightly by 0.3 percentage point to 4.8 percent in 2014. The slower increase is primarily driven by China, which will continue to slow down from 7.5 percent in 2013 to 7 percent in 2014, when based on official growth rates, as structural and policy challenges continue to weigh on China’s economic transformation
- Among the other emerging markets, India, Latin America and other developing Asia are to witness a slight growth improvement in 2014, up from a weaker growth performance over 2013.
- The world’s major economies still face many structural flaws and policy constraints that hinder more investment and faster productivity growth, making the medium-term outlook for a significantly faster path of global growth more uncertain.
- The medium-term outlook for the U.S. and other mature economies remains slightly more positive than in previous years, as these economies still have some way to go toward closing remaining output gaps. The U.S. will therefore grow at 2.4 percent, on average per year, and the Euro Zone at 1.2 percent from 2014-2019.
- The medium term slowdown in the growth trend of emerging and developing markets is more dramatic. As China, India, Brazil, and others mature from rapid, investment-intensive ‘catch-up’ growth to a more balanced growth model, the structural ‘speed limits’ of their economies are likely to decline, reducing emerging market growth from 4.3 percent, on average per year, from 2014-2019 to 3.2 percent from 2020-2025.
- Emerging markets constituted just below half of world GDP in 2012, when converted to US$ at purchasing power parities, up from about one third in 2000. In the next decade this shift will continue at a much slower speed. By 2025, emerging markets will capture just over half of world GDP, with China clearly being the largest economy in the world.
- The upsides for the medium term growth outlook for the global economy are a significant faster increase in public and private investment and an acceleration in the economies’ reform agenda to accelerate productivity growth (see The Conference Board’s global growth scenarios).
Global Outlook for Growth of Gross Domestic Product, 2014-2025
Note: projections are based on trend growth estiamtes, which – for the period 2014-19 – are adjusted
for adjustments from remaining output gaps
*Europe includes 27 members of the European Union (excluding Croatia) as well as Switzerland and Norway.
**Other advanced economies are Australia, Canada, Iceland, Israel, Hong Kong, South Korea, New Zealand, Singapore, and Taiwan Province of China.
***Southeast Europe includes Albania, Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Montenegro, and Turkey.
Source: The Conference Board Global Economic Outlook 2014, February 2014 update
Global Outlook for Growth of Gross Domestic Product, 2013-2025
|Actual Growth 2010-2012||Forecast Growth 2013||Forecast Growth 2014||Projected Growth 2014-2019||Trend Growth 2020-2025|
|of which: Euro Area||0.9||-0.3||1.0||1.2||1.2|
|Other developing Asia||5.6||4.3||4.9||4.8||4.2|
|of which: Brazil||3.5||2.0||2.3||2.9||2.8|
|of which: Mexico||4.4||1.5||3.1||2.9||3.1|
|Middle East & North Africa||4.0||1.8||3.0||2.9||2.9|
|Russia, Central Asia and Southeast Europe***||4.6||1.9||2.7||1.8||1.3|
and Developing Economies
Note: projections are based on trend growth estiamtes, which – for the period 2014-19 – are adjusted for adjustments from remaining output gaps
* Europe includes 27 members of the European Union (excluding Croatia) as well as Switzerland and Norway.
** Other advanced economies are Australia, Canada, Iceland, Israel, Hong Kong, South Korea, New Zealand, Singapore, and Taiwan Province of China.
*** Southeast Europe includes Albania, Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Montenegro, and Turkey.
Source: The Conference Board Global Economic Outlook 2014, February 2014 update
Distribution of World GDP in 2000, 2012 and 2025
Note: GDP shares are converted to U.S. dollars using purchasing power parities.
Source: The Conference Board Global Economic Outlook 2014, November 2013
The Conference Board Global Economic Outlook 2014 provides projections for the output growth of the world economy for 2014, 2014-2019, and 2020-2025, including 11 major regions and over fifty individual mature and emerging economies. The Conference Board outlook takes the dynamics of factor inputs (savings, investment and employment) and demographics of each country into account. The projections are based on a growth accounting model that estimates trend growth as the contribution of the use of labor, capital and productivity to the growth of GDP. While labor growth is projected using demographic information such as working age population, capital and productivity growth are estimated on the basis of a wide range of related variables during past periods. The trend growth rates that are obtained from this process are adjusted for possible deviations between actual and potential output. This approach distinguishes The Conference Board outlook from other projections as it helps identify underlying structural changes in the economy by extending projections based on a growth accounting model, looking at the contributions of labor, capital and productivity, over more than a decade. Most forecasters only focus on the next year or two, while the International Monetary Fund provides an outlook that projects five years ahead. The Conference Board’s global outlook is complemented with a series of growth scenarios for six major regions, including the United States, Europe, China, India, Southeast Asia and Brazil.
- Short-term (2013) projections are based on The Conference Board U.S. Economic Forecast, The Conference Board Leading Economic indexes (LEIs) for 11 countries/regions, and secondary sources, such as the World Economic Outlook (International Monetary Fund), the Economic Outlook (Organization for Economic Cooperation and Development), European Commission and Congressional Budget Office.
- Medium-term (2014-2018) and long-term (2019-2025) projections are based on a growth accounting model, looking at the contributions of labor, capital and total factor productivity to growth. Growth in labor is approximated by the growth in working age population. Capital growth and total factor productivity growth are estimated by system of equations which are largely based on relevant past-period variables and some economic variables.
- The projected GDP growth, based on the growth accounting framework, is considered relative to measured trend growth of an economy. Our optimistic and pessimistic scenarios are based on the deviation of capital growth and total factor productivity growth from their respective trend growth.
- The calculation of measures of regional and global GDP growth requires levels of GDP to weigh the growth rates of individual countries and regions by their size of GDP. The country and region GDP weights are current weights, which are the average for the beginning and the end of each period, and which are benchmarked on purchasing power parity (PPP)-adjusted GDP from Penn World Table 7.0.