Global Economic Outlook for 2016

Which markets will thrive next year and which will struggle? Morningstar's head of investment strategy Andy Brunner gives his predictions for the major economies

Andy Brunner 8 December, 2015 | 2:00PM
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Yet again consensus forecasts portend a quickening in the pace of global growth for 2016. The expected advance is of limited magnitude, however, with GDP predicted to grow by around 3.4% some three tenths above the current year’s expected outturn. Little change is expected from developed market while the upturn in emerging markets largely reflects sizeable rebounds in some of the worst hit economies. Ongoing strong developed market domestic demand growth and an expected rebound in industrial production are the key drivers.

A similar pattern to this year’s robust US domestic demand-led growth, partly offset by a negative net trade contribution, is predicted for 2016 resulting in headline GDP growth remaining in the 2-2.5% range that has contained much of this cycle. The household sector remains key to sustainable expansion and ongoing healthy employment and income growth should counterbalance waning benefits from lower energy prices and an expected modest and gradual rise in interest rates. A faster pace of inflation and too strong a dollar, however, could both upset Fed policy.

That euro area business and consumer confidence proved resilient to several shocks this year suggests the recovery is strengthening and steady growth of around 1.5-2% is expected for 2016. Growth has spread more broadly throughout the region and there is still scope for further quantitative easing should inflation disappoint. Other main risks are from China, geopolitics and domestic political issues.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK