Global real gross domestic product (GDP) growth is likely to have slipped to 2% last year from 2.3% in 2012, but should recover to 2.7% this year and accelerate further to 2018 predicts Dun & Bradstreet (D&B).
The commercial information and business insight group announced the results of its 2014-to-2018 Global Economic Outlook, based on analysis of its proprietary business data. The report provides D&B’s perspective on the global business conditions in 2013 and a projection into 2014 and beyond.
“Recovering from the Great Recession continues to challenge global economies,” said Paul Ballew, chief economist at D&B. “Although growth is still constrained for various developed countries, many are improving and are poised to experience a sustained acceleration in growth headed to recovery.
“Despite the concerns that linger in every region, 2013 was a year in which businesses adapted to the realities of a sluggish and prolonged recovery. This approach should serve them well as they navigate the challenges and risks of 2014 and beyond.”
Highlights of the D&B report include:
- Impacts of the late-2000s recession remain a key challenge:
The economic recovery since the recession remains the most protracted of the last century, with global GDP growth well below previous trends. Of 132 countries assessed by D&B’s country risk rating score, 93 rated worse in 2013 compared to early 2008, while only 15 improved. The end of monetary easing, fiscal pressures in advanced economies, and uneven restructuring efforts in emerging markets could hinder a full recovery.
- UK level of risk is low and improving.
D&B predicts that the UK will outperform most European markets. As a result, unemployment will fall while payment and credit risks are likely to decrease between 2013 and 2014. However, downside risks remain. Uncertainty about Scottish independence (a referendum will be held in 2014) and British membership of the European Union (EU), on which a referendum could take place in 2017 might impact corporate investment with companies already campaigning for remaining in the EU. In addition to political quarrels, the unresolved eurozone crisis (to which almost 50% of Britain’s exports go) also undermines British growth prospects, while the possible end of quantitative easing (QE) in the US could lead to rising interest rates around the globe.
- The end of quantitative easing remains a concern:
The US Federal Reserve’s decision to end its QE programme (which provides financial institutions with new capital to encourage increased lending and liquidity) could undermine economic recovery. As other countries consider similar proposals to help reduce public debt and spur GDP growth, the pace and timing of the phase-out remain key concerns, particularly in the US.
- Recovery remains uneven in advanced economies:
The pace of economic recovery in advanced economies remains mixed. Increases in global public sector debt proved especially alarming in 2013, as many advanced economies struggled to minimise their government debt percentage of GDP. In contrast, countries such as the US, UK, and Japan saw significant declines in household debt in 2013, which should support moderately strong economic growth in these markets.
- Some emerging markets struggle to restructure:
While many emerging markets were pivotal in moving the global economy out of the Great Recession, several have failed to positively restructure the supply-side drivers of their economies. Critical factors such as the relative ramp-up in asset prices, rampant credit extension resulting in bubbles and inappropriate lending, declines in external sector deficits, and increases in public debt over the last five years will impact how quickly some emerging markets recover through 2018. Venezuela, Angola, Iran, and Nigeria are among those countries that may have misallocated inflow of foreign capital relative to other emerging markets. Renewed focus on short-term vulnerabilities, supply side economics, and political and social pressures could spur recovery in emerging markets.
The full 2014-2018 Global Economic Outlook report can be accessed here.
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