Following a Fourth Year of Lackluster Growth, a Modest Recovery Should Define the World Economy in 2016

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Meanwhile, the deceleration in China’s economy will continue. After 6.8 percent growth in 2015, the Chinese economy will weaken further, only growing 6.3 percent in 2016. While the service sectors are doing well, the industrial sectors, especially heavy manufacturing and mining, are struggling.

Since the beginning of 2013, emerging markets have been hit by a “perfect storm”: plunging commodity prices, capital outflows, and plummeting currencies (forcing some central banks to raise interest rates, even during recessions); swooning stock markets; and stagnating world trade. Those hit hardest have been commodity exporters, especially those with weak finances or other structural problems.

“Nevertheless, as commodity prices bottom out in 2016, the pressures on emerging markets will likely ease,” Behravesh said.

Other Top-10 predictions include:

• Some emerging markets will remain in recession, while growth elsewhere will disappoint.
• Commodity prices will reach a trough. The prices of both oil and other commodities are expected to be flat though the first half of 2016, and then begin to rise very gradually in the second half.
• Any rise in inflation will be modest. A variety of factors have conspired to keep inflation in many parts of the world in check. Principal among these are the large amounts of excess capacity worldwide and the nosedive in commodity prices.
• The Federal Reserve and the Bank of England will raise interest rates a little, while other central banks will either be on hold or ease more.
• The US dollar will rise further. IHS expects that the dollar will appreciate another 3 to 5 percent in the first half of 2016, before topping out. This means that the dollar/euro rate will approach parity by the middle of 2016, reaching as low as $1.02 by midyear.

About IHS

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