Executive Summary
Apart from the United States, recent economic data in many major economies have been a bit discouraging. Japan has slipped back into recession again, and economic growth in the Eurozone generally remains anemic. The rate of real GDP growth in China receded to a five-year low in Q3- 2014. So, how in the world will the global economy achieve the 3.8 percent GDP growth rate that the International Monetary Fund forecasts for 2015?
The U.S. economy should grow nearly 3 percent in 2015, which would contribute roughly 0.5 percentage points to global GDP growth. Real GDP in China is unlikely to grow at a double- digit rate ever again, but the 7 percent Chinese growth rate in 2015 that the IMF projects, if realized, would still make a meaningful contribution to overall global growth. Developing economies excluding China, which account for roughly 40 percent of global GDP, should grow nearly 5 percent supported, in part, by solid population growth.
Expecting global economic growth to return to the 5 percent per annum rates of 2003-2007, which are an outlier when viewed in the context of the past few decades, may not be realistic anyway. The rates of global GDP growth that we forecast for the next two years are essentially equivalent to the 3.4 percent annual average growth rate that the global economy achieved on average between 1980 and 2013. Maybe the “new normal” of today’s slower global growth, at least when benchmarked versus the 2003-2007 period, is actually the old “normal.” The experience of 2003-2007 does not appear to be “normal” at all when viewed in a longer-run context
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