Article

D&B 5-year global economic forecast: uneven, fraught with risks

From 2013 to 2017, growth ramp-up of 2% to 2.9% expected

April 10, 2013

Commercial information specialist D&B has published its five-year forecast of the global economy. And depending on where in the world you are, the news ranges from "not stellar" to "mostly bad."

According to the report, the global economy over the next five years will experience "sluggish growth against challenging headwinds, differing from region to region."

D&B's "Global Economic Outlook to 2017," provides insights on several contributing factors to real GDP growth for more 132 countries representing seven major geographic areas. The report is based on a comprehensive study and analysis of proprietary business data and external data sources, the company said in a news release.

"The recovery from the 2008–2009 recession represents the slowest and most problematic during the post-war era," said Paul Ballew, global chief data and analytic officer at D&B — confirming what the world already knows. He went into greater depths, forecasting continued weak growth globally accompanied by government belt-tightening to offset public sector debt:

We believe economic growth will remain uneven across regions and time as structural and fiscal imbalances, new political risks and other headwinds result in a global economy predicted to achieve annual real GDP growth of only 2.9 percent by the end of 2017. On the flip side, these pressures are partly offset by substantial improvement in corporate sector health.
The dramatic increase in public sector debt since 2008 has resulted in an important inflection point for most developed economies. As a result, fiscal austerity will have to increase through spending restraint, and higher tax levels will occur over the next few years as governments attempt to balance their books. That, in turn, will limit growth in economies such as the United States, where private sector restructuring has begun.

D&B summed up conditions in seven geographic regions:

The U.S. economy continues to move slowly toward recovery.D&B said that concerns over a double-dip recession are unfounded. Significant improvement in the health of the corporate sector combined with moderate consumer spending growth are offsetting austerity that will be required at all levels of government.

In its North American assessment, D&B described Mexico and the U.S. as "stable," but said Canada could be vulnerable to external shock due to high consumer debt and overvalued housing. U.S. growth should ultimately shield Canada, though, the report said.

The outlook for European economies remains troubling. The crisis in the Eurozone has subsided for the time being, but underlying challenges remain substantial, with concerns about competitiveness of European economies and the ability of the business sector to offset fiscal restraint.
Age demographics could be a negative factor for the Asia-Pacific region. Aging populations will mean a shrinking group of workers. Additionally, increases in water and energy demand could result in negative economic shocks.
In Latin America and the Caribbean, economic performance will likely be uneven. The region will improve moderately, but political uncertainty, unpopular socio-economic policies, and protectionist initiatives could be a drag on economies.
Growth in Eastern Europe and Central Asia will remain below the pre-crisis trend. Decelerating growth in Russia will weigh on the rest of the region, D&B said.
Flat oil prices and political issues will curb growth in the Middle East and North Africa. D&B said that commercial risks could be significant in the region, given political tensions and issues such as corruption and a weak legal and regulatory environment.
Sub-Saharan Africa will show resilience despite slowing world demand. D&B expects the region to experience solid growth, though Ghana, Kenya, Tanzania and Uganda face considerable economic challenges. Violence in the Democratic Republic of Congo and Mali could also affect the region.

A guarded forecast

Ballew said he expected that global recovery would remain "below trend" until at least the middle of the decade. "[W]e expect it to be lower than in the five years prior to 2008 as several concerns still weigh heavily on these forecasts."