
Latest Global Forecast
PLEASE NOTE: This full report is for journalists’ information only.
©2007 The Economist Intelligence Unit Limited. You may report on it but you may not reproduce all or a substantial part of the report.
Key changes since October 10th 2008
- The global economic outlook continues to darken. Not only has a stream of poor data provided further strong evidence of the severity of the downturn now under way in most of the developed world, but many emerging markets in key regions are showing signs of mounting strain or are now in outright crisis. As such, the Economist Intelligence Unit has made further downward revisions to its global growth forecasts and now expects expansion of just 0.9% at market rates and 2% at purchasing power parity in 2009. The US, the euro zone, the UK and Japan will all contract in 2009.
- Concerns are also rising about China’s resilience to the global downturn, with much recent data pointing to a sharper than expected deceleration in Chinese growth prospects. As a result, we have downgraded our forecast for Chinese real growth in 2009. We have also made steep downward revisions to our forecasts for the transition region, where many economies remain highly vulnerable to continued financial turbulence owing to large external financing requirements. We expect world trade to contract in 2009.
- Global economic recovery will be tepid in 2010 at best. Moreover, at no point over the next five years do we expect growth to recover to the rates that prevailed during the boom years of 2004-07.
- Ongoing financial and asset market woes, coupled with falling commodity prices, will exert significant downward pressure on prices in much of the developed world in 2009. This, in turn, will allow central banks to continue to loosen policy aggressively. We expect the US fed funds rate to be lowered to 0.5% by end-2008.
- The downgrading of global growth prospects has also led us to make further downward revisions to our commodity price forecasts. We now expect oil (Brent Blend) to average US$65/barrel in 2009 (down by 34% on
2008) and US$68/b in 2010. Continued deleveraging and risk aversion will also underpin the US dollar in 2009, thus exerting further downward pressure on oil prices during the year.
Any queries on the economic assumptions should be directed to Robert Ward in London or Jan Friederich in Hong Kong. All queries on the commodity price forecasts should go to Caroline Bain, senior commodities editor, also in London.
EIU-global-outlook-december-2008