The Conference Board Global Economic Outlook 2017 provides projections for short-, medium- and long-term output growth of the world economy, including 11 major regions and individual estimates for 33 mature and 32 emerging market economies for 2016, 2017, 2017–2021, and 2022–2026. The Conference Board has been publishing its annual Global Economic Outlook since 2008.
The 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 contributions 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 obtained from this process are adjusted for possible deviations between actual and potential output. This approach distinguishes The Conference Board Global Economic 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.
For a strategic overview of The Conference Board Global Economic Outlook 2017, download StraightTalk® (members only).
For a detailed description of the methodology, see Erumban and de Vries (2016).
The framework is based on the works of Dale Jorgenson and colleagues at the Harvard University. Over the years The Conference Board has extended and improved the projection methods, using more information from the historical performance and adjusting for cyclical deviations from the trend in the short term. Last year, the model was further revised to include more theoretically pertinent explanatory variables in estimating total factor productivity and capital services. This includes economic variables such as research and development spending, capacity utilization, and relative factor prices and institutional variables such as corruption. The model has been further revised this year to account for the impact of real exchange rates and interest rates on capital services, and the impact of trends in globalization on productivity and investment.
The Global Economic Outlook uses alternative GDP estimates for China, which are adjusted for overstated official Chinese data. Based on Wu (2014), growth rates of Chinese industrial GDP are adjusted for misreporting bias and non-material services GDP are adjusted for biases in price deflators. This adjustment has important implications for our assessment of the growth rate of the global economy in general and that of the emerging markets in particular – both reflecting a downward adjustment in their recent growth rates. For a detailed discussion on this adjustment, see Wu (2014) and for frequently asked questions on the China adjustment see China GDP FAQ.
Medium-term (2017-2021) and long-term (2022-2026) projections are based on the growth accounting model. The projected GDP growth rates based on the growth accounting framework are to be interpreted as the trend growth rates of an economy. Even though, in the long run, countries grow according to their trend, in the short run they may deviate from their long-run path due to temporary factors. Annual estimates between 2016 and 2020 are constructed using estimates of current output gaps (either positive or negative) in individual economies. Assuming that potential output in a country grows at the model projected trend growth rates, we estimate the required growth rate for a country to close its current (2015) output gap by a given year in the future. Annual growth for 2017 are then linearly interpolated using 2016 growth and trend growth adjusted for the output gap for the period 2017-2021. This procedure is supplemented with our insights on short-term trends in several countries, derived from The Conference Board U.S. Economic Forecast, The Conference Board Leading Economic Indexes (LEIs) for 13 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. In the long-run (2022-2026), we assume actual GDP growth coincides with the trend GDP growth.
The model predicts estimates of individual country GDP growth rates Regional aggregates are computed using Purchasing Power Parity (PPP) converted current price GDP weights averaged for the beginning and the end of each period as weights. The PPPs, obtained from the International Comparison Program 2011, are updated to 2015 using movements in national prices relative to GDP deflators for the United States.
The underlying historic data used in the projection are primarily from The Conference Board Total Economy Database™, which is a comprehensive database with annual data covering GDP, population, employment, hours, labor quality, capital services, labor productivity, and total factor productivity for 124 countries in the world.