PwC has released the top five predictions for 2015 made by their economists.
1.US economic growth is expected to be the fastest for a decade
PwC economists have pointed out that unemployment in the US fell last year to below 6% and this, combined with lower oil prices, is expected to contribute to rising household consumption. In the analyst’s main scenario it is projected that US growth will grow by more than 3% this year, the fastest growth rate since 2005. Also, in line with this, the US is expected to contribute approximately 3% of global GDP growth this year, its largest contribution in a year before the financial crisis.
2. Economic growth in China is projected to be the slowest since 1990
PwC still expect China to make the biggest contribution to global growth this year. However, its projected growth rate of 7.2% is going to be the slowest since 1990 and its high debt levels pose some downside risks to the main PwC scenario. Two of the BRIC economies are also expecting severe problems. In Russia, PwC anticipate GDP to shrink this year on the back of low oil prices and economic sanctions. In Brazil, growth is expected to be sluggish and the main scenario project is for the economy to grow by 1% at the most. Together, PwC economists expect the BRIC’s contribution to global growth to fall for the second year in a row to approximately 33%.
3. Low inflation leads to quantitative easing in the Eurozone
PwC expects both inflation and growth to remain very low in the Eurozone this year. ECB is expected to undertake a quantitative easing programme involving the purchase of government bonds, in an attempt to boost demand and head off deflation.
4. India is expected to resume growth above 6%
After growth levels below 6% since 2012, PwC economists think 2015 could be the year that India turns a corner, posting growth of approximately 7%. In the short term, low oil prices are likely to increase GDP growth, ease the pressures of India’s high current account deficit and help reduce inflation. In the medium term, PwC think that the February 2015 budget could see India take a step towards implementing new structural reforms which will boost the economy.
5. Economic growth in Sub-Saharan Africa (SSA) to outpace growth for the fifteenth year in a row
PwC has said that it expects the combined GDP of SSA’s four largest economies, Nigeria, South Africa, Angola and Ethiopia, to overtake the economic output of Italy this year when measured in constant 2013 international dollars. For businesses, this is a further sign of the potential of SSA as a region in which to now invest.
Keeping a business eye out
PwC has also highlighted three factors for businesses to look out for this year. Firstly, oil prices have been falling recently due to slowing global demand, the US shale boom and steady production from OPEC. Richard Boxshall, PwC Senior Economist has said, “our predictions and projections assume that oil prices will average between US$60 – 70 over the course of 2015 and finish the year at approximately US$80. However, due to the highly unpredictable nature of oil prices, businesses should plan for different scenarios.”
Secondly, focusing on China, Boxshall said, “the Chinese economy clearly has vulnerabilities given its high total debt level, around 250% of GDP, and estimates by Chinese academic researchers that around US$6.8 trillion of the investments made since 2009 may have been wasted on creating ghost towns, unused office blocks and mothballed factories. So far the Chinese government appears to have this under control, but the downside risks of hard landing should not be ignored.”
Thirdly, Boxshall said the following on the escalation of geopolitical risks, “an escalation of the geopolitical tensions in Russia and Ukraine and in the Middle East could have a negative influence on business confidence, with consequent implications for global growth.”
Edited from press release by Claira Lloyd
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