Tepid growth in global economy due to concerns over Greece and slowdown in emerging markets

HIGHLIGHTS

• The world economy is forecast to expand by a tepid 2.5 per cent this year.
• Waning growth in key emerging markets and the Greek financial turmoil have weakened the global outlook. 
• Economic conditions in Europe, outside of Greece are improving, thanks to the weak euro and drop in oil prices.
• Weaker growth in China is weighing on the Asia-Pacific region's export sector.

OTTAWA, July 30, 2015 /CNW Telbec/ - Due to ongoing turbulence, the global economy is forecast to expand by a tepid 2.5 per cent this year. But a rebound in the U.S. and better economic conditions in much of Europe point to better growth ahead, according to The Conference Board of Canada's World Outlook: Summer 2015.

"Much attention has been paid to the ongoing Greek financial drama, but there are some positive developments in the global economy," said Glen Hodgson, Senior Vice-President and Chief Economist, The Conference Board of Canada. "Economic conditions in Europe, outside of Greece are improving thanks to the weaker euro and drop in oil prices. This, combined with a positive outlook for the U.S., should help the global economy strengthen over the next two years." 

Overall, economic growth is picking up in the eurozone. Real GDP in the region is expected to expand by 1.5 per cent this year and 1.8 per cent in 2016, an improvement over the contractions seen in 2012-13. Economic growth in the region would be higher if the German economy was not struggling. Real GDP in Germany is expected to increase by less than 2 per cent this year.

The Greek government's decision to accept the austerity measures and reforms demanded by the EU has lessened some of the worries concerning an exit from the eurozone for now. However, Greece's long-term membership in the currency union is by no means assured, and renewed slippage in Greece's adjustment policies would have renewed repercussions for the world economy.

The U.S. economy is gaining momentum from its first quarter slump and is forecast to grow by 2.2 per cent this year and 3.1 per cent in 2016. Labour markets are in great shape heading into the second half of the year, with the economy creating over 200,000 jobs per month. In addition, there have been signs that wage increases are finally starting to pick up due to tightening labour markets.

The Asia-Pacific region continues to lead the world in growth, and is expected to expand at an annual pace of around 6 per cent over 2015-16. However, China will struggle to maintain a 7 per cent growth rate this year and next, which is weighing on the region's export sector. China recently lowered interest rates again in response to a drop in its equity markets. China is the major export market for most Asia-Pacific countries, and weaker Chinese demand growth has hurt electronics and machinery exporters elsewhere. Japan's economy is emerging from recession and should not be a drag on growth in the region over the near term.

Join Glen Hodgson for his live webinar, Canadian Outlook with the Chief Economist--Summer 2015: A Year of Uncertainty, on Tuesday, August 18, 2015. Link:  http://www.conferenceboard.ca/e-library/abstract.aspx?did=7231

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SOURCE Conference Board of Canada

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