Economic Forecasts from the World's Leading Economists

Uncertainty reigns supreme

Two months have passed since the Brexit vote and, although the dust is gradually settling, the external environment remains challenging. The global economy slowed in the second quarter and financial markets had another rocky month in June when the UK voted to leave the EU. Risky assets, such as equities and commodities, declined sharply, before swiftly recovering as fears of imminent spillovers to the global economy receded. Following the vote, market expectations for a more accommodative monetary policy stance around the world increased, which, in turn, spurred risk appetite to rise even higher: equities around the globe have reached new record highs and commodities prices, led mainly by crude oil, have returned to the gradual recovery path which was briefly interrupted by the aftermath of the Brexit vote.

Latin America’s economic climate shows signs of improvement

Many countries in Latin America faced a harsh economic reality toward the end of 2015 and in the first half of 2016. The alarms went off earlier this year when commodities prices registered a renewed plunge in mid-January, which prompted capital outflows in the region, an episode of heightened volatility in Latin America’s foreign exchange markets and a deceleration of economic activity. Latin America’s economy had been contracting since the second half of 2015 and decreased further in the first quarter this year as Brazil, Ecuador, Uruguay and specially Venezuela, registered sharp GDP contractions, while nearly all of the rest of the economies in the region experienced a slowdown. A regional GDP aggregate showed that Latin America’s GDP contracted 1.1% annually in Q1 (Q4: -0.9% year-on-year), which marks the sharpest decrease since 2009, when the economy was gripped by the fallout from the global financial crisis.

Economy accelerates in Q2 on improvements in region’s key players

Recent data show that the economy of the Central American and the Caribbean region gained traction in the second quarter of this year, improving notably over the deceleration recorded in the first quarter. GDP expanded 3.5% over the same quarter of last year, according to a preliminary estimate. The figure marked the fastest increase in over a year and was an improvement over the 2.7% expansion in Q1.

Domestic demand drives growth in Q2, ASEAN leaders focus on boosting trade

Growth in the Association of Southeast Asian Nations (ASEAN) picked up moderately in the second quarter as the region’s largest economy, Indonesia, kicked into a higher gear. The ASEAN economy expanded 4.7% over the same period of last year, just above Q1’s 4.6% increase. Faster growth in the Philippines, Thailand and Vietnam also contributed to the acceleration, while Malaysia’s economy lost steam and growth stagnated in Singapore. Overall, the boost came on the back of improved performance in domestic demand, while the external sector continues to suffer from weak global trade flows. 

Disappointing performance in India hits ESA growth in Q2 

Recovery holds ground in H1 but clouds loom  

The Eurozone’s recovery lost traction in the second quarter of the year as GDP expanded at the slowest pace seen in two years. Growth came in at 0.3% over the previous quarter, half of the first quarter’s robust 0.6% increase. However, the result was likely influenced by transitory factors—such as the early timing of Easter and a mild winter—which had boosted the first quarter’s result. Overall, the big picture remains bright and GDP in H1 increased a healthy 0.4%, supported by loose monetary policy and an improving labor market.

CEE economy picks up in Q2; political uncertainty persists

The economies of Central and Eastern Europe (CEE) regained some momentum in the second quarter of the year after Q1’s slump. Regional GDP growth sped up from 2.9% in Q1 over the same period last year to 3.3% in Q2, mainly due to solid growth in private consumption. The acceleration was supported by many of the conditions that have been fueling growth for several quarters now, including improvements in the labor markets, subdued inflationary pressures, accommodative monetary policy and fiscal loosening. At the same time, Q2’s reading highlighted the continued deterioration in fixed investment across the region, which had started in Q1 as EU development funds faded.

SEE decelerated in Q2 amid domestic headwinds 

Recent data show that the economy of the South-Eastern Europe (SEE) region decelerated further in the second quarter. After 3.5% growth in the first quarter, our panel of analysts expects the region to have decelerated and expanded 3.3% in Q2 over the same period last year. The slowdown is likely due to weaker economic developments in Turkey, the region’s biggest economy. In addition, Serbia’s economy grew only 2.0% in Q2, which came in below the previous quarter’s 3.8% expansion. The disappointing performance came on the back of a deceleration in exports and fixed investment, while total consumption was robust. On a positive note, Romania’s economy grew substantially in the second quarter and its GDP expanded at the fastest rate in nearly eight years supported by domestic demand, which has been boosted by VAT cuts and higher public salaries.

Contraction in regional economy softens but…

In the wake of a plunge in commodities prices, a deceleration in China’s economy and the beginning of a protracted recession in Russia, the economy of the Commonwealth of Independent States (CIS) contracted in 2015, showing a substantial deterioration toward the end of that year. The persistent weakness in commodities prices and a further deceleration of the Chinese economy at the beginning of this year prolonged the recession in the region. The release of more complete data across the region showed that the CIS economy contracted 0.6% in Q2 over the same period last year, which was, nonetheless, less pronounced than the 1.1% decrease recorded in Q1. Downward pressure on the region’s growth eased in the second quarter owing principally to an improvement in the economic situation in Russia, which is by far the region’s largest economy.

All eyes on a potential oil cap deal at September’s meeting

A comprehensive dataset showed that growth in the Middle East and North Africa (MENA) fared worse at the outset of the year than initially expected. Despite rising, oil prices remained at low levels, which prompted some countries to remove subsidies and cut public expenditure, hitting growth in Q1. Moreover, economic dynamics were negatively affected by tepid global demand and challenging domestic conditions. GDP for the region expanded 1.8% annually in Q1 (Q4: +2.1% year-on-year), which was below the 2.0% increase reported in the previous month. However, some tentative signs of improvement have since emerged.

SSA decelerates further in Q2 amid low commodity prices and domestic headwinds