Stagnant Growth to Continue Amid World of Uncertainties and Disruptions

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Geopolitical tensions, policy uncertainty, financial market volatility, and rapid changes in technology will pin the world economy to a slow-growth path, according to The Conference Board Global Economic Outlook 2017, released today. The report projects global GDP growth of 2.8% in 2017, a very modest improvement from 2.5% in 2016. By contrast, annual growth rates were routinely above 4% in the mid-2000s, and averaged 3.6% in 2010–15. Even this low baseline scenario faces considerable uncertainty in the next decade; seismic upheavals in the global trade system and other downside risks could detract another 0.9% from projected growth over the next five years.

“It is now undeniable that the global economy is stagnant,” said Bart van Ark, Chief Economist at The Conference Board. “The holding pattern we described in last year’s report has been replaced by a gradual descent to a lower altitude, with a risk of further decline if the sources of growth weaken further.” 

“Donald Trump’s upset victory in the U.S. presidential election further increases uncertainty over the fate of the global economy, but—as of now—doesn’t alter our bottom-line growth picture,” said Gad Levanon, Chief Economist for North America. “Fiscal policy measures such as tax cuts and infrastructure investments may provide some growth upside for the U.S. in the short term. But they’re likely to have only a minor impact on an economy that is beginning to reach full capacity and facing the prospect of impending interest rate increases, which may reduce the appetite to invest.” 

According to the report, businesses seeking to buck the slow-growth trendneed to develop agile strategies to overcome uncertainty, shocks, and disruption. The threat of multiple short- and medium-term disruptive forces means many companies must rethink their strategies to become more agile and resilient. The ongoing digital transformation of economies offers upside potential, but fulfilling it will require a renewed interest in business spending. 

There are bright spots in this year’s outlook.As energy and commodity prices stabilize, resource-rich emerging economies in particular will see improved prospects in 2017. Over the medium term, quantitative and qualitative sources of growth will likely improve global growth slightly, to an average of 3.0% in the years 2017–21—or slightly over 2.0% in mature economies and around 3.7% in emerging markets. However, annual global growth is projected to slip back down to 2.7% in 2022–26, as aging populations reduce labor supply in the mature economies and slow workforce growth in the major emerging economies. Global Economic Outlook 2017 includes GDP growth projections and analysis for 11 major regions and 65 individual economies (33 mature and 32 emerging) in all, across three time frames: 2017, 2017–21, and 2022–26. 

“For the foreseeable future, the majority of global growth will continue to come from quantitative sources such as labor force growth and investment in structures and machinery,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research. “However, we’re optimistic that the contribution of qualitative growth sources—labor force skills, technology investments, increased productivity—is set to improve significantly from the dismal record of the last ten years, especially in the mature economies. And, though a return to the soaring growth rates of the 1990s and 2000s is unrealistic, emerging markets will continue to expand much faster than their mature counterparts; for many countries, substantial catch-up potential and demographic dividends remain to be tapped. If they successfully rebalance away from (tangible) capital accumulation toward human capital and innovation, these emerging economies may well be key in buoying overall global growth.” 

Mature economies: Anemic growth may be as good as it gets 

In sum, mature economies are forecast to grow 1.8% in 2017, up from an estimated 1.7% in 2016. Growth is projected to rise to 2.1% in 2017–2021, before slipping back to 1.8% in 2022–2026. 

- United States GDP is projected to grow 2.0% in 2017, up from 1.6% in 2016

What positive or negative growth impact the Trump Administration portends remains to be seen. In the medium term, 2017–2021 growth is projected at 2.2% on average, which is expected to slip to 2.0% trend growth in 2022–2026.

- Euro Area GDP is projected to dip further to 1.4% in 2017, down from 1.5% in 2016

In the medium term, 2017–2021 growth is projected at 1.7% on average, which is expected to slip to 1.2% trend growth in 2022–2026.

- United Kingdom GDP is projected to grow just 0.8% in 2017, down from 1.7% in 2016

As the economic implications of Brexit continue to unfold, annual growth is projected to average 1.5% in 2017–2021—less than the Euro Area average over the same period and 0.5 points below the 2010–15 U.K. average—before slipping to 1.4% trend growth in 2022–2026.

- Japanese GDP is projected to grow 0.6% in 2017, down from 0.9% in 2016

Difficulties continue in Japan through the medium term. Growth is projected to creep up to 1.2% in 2017-21 on average and slip back to 0.8% average trend growth in 2022–26. 

Emerging markets: Slightly rosier prospects

At 3.2%, growth among emerging and developing economies was about a point and a half stronger than mature economies in 2016, after routinely outstripping them by 4 or 5 points in the previous decade. While substantial pressures remain in all the major emerging markets, overall growth should rebound further and stabilize at 3.6% in 2017, 3.7% on average in 2017–21 and settle on a trend growth rate of 3.5% in 2022–2026.

- Chinese GDP is projected to grow 3.8% in 2017, down slightly from 3.9% in 2016

Since 2015, The Conference Board has used its own Chinese growth estimates. (See FAQ available here.) Based on these figures, medium-term growth is expected to fall even further from China’s boom years, to 3.3% on average in 2017–21 and a long term trend of 2.9% in 2022–26.

- Indian GDP is projected to grow 6.5% in 2017, down from 6.8% in 2016

India’s growth figures will remain relatively strong—if gradually fading—over the next decade. Average growth for 2017–21 is projected at 5.8%, before slipping to 5.5% trend growth in 2022–26.  

- Latin American GDP is projected to grow 1.2% in 2017, up from −1.3% in 2016

Continued anxiety in some of the region’s largest economies will constrain any short term rebound from a dismal 2016. Medium-term growth is expected to improve to 2.6% on average in 2017–21, before rising slightly to a trend growth rate of 2.7% in 2022–26.

- Sub-Saharan African GDP is projected to grow 2.3% in 2017, up from 1.7% in 2016

The region remains a medium-term opportunity, with growth expected to rise to 4.8% in 2017–21 and 5.1% in 2022–26.

- Russia, Central Asia, and Southeast Europe GDP is projected to grow 2.0% in 2017, up from zero growth in 2016.

Next year’s projected improvement in Turkey and the Russia and Central Asia region is expected to slip in the medium term to 1.6% in 2017–21 on average and 1.0% in 2022–26.    

Visit Global Economic Outlook 2017 portal for more, including Bart van Ark’s post-election analysis and regional reports for the United States, Europe, and Emerging Asia. Journalists: email media contacts, top, for complete copy of any of these reports.

About The Conference Board Global Economic Outlook 

The Conference Board Global Economic Outlook 2017 provides projections for the 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 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. 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.