Global Economy to See Modest 3.3 Percent Growth in 2014

  Global Economy to See Modest 3.3 Percent Growth in 2014

IHS Top10 Predictions foresees an end to “wallowing in an economic soft patch”

Business Wire

LEXINGTON, Mass. -- December 12, 2013

After wallowing in an economic “soft patch” for the past two years, the global
economy is likely to emerge in 2014 with modest growth of 3.3 percent compared
with 2.5 percent this year, according to a forecast from Nariman Behravesh,
chief economist of IHS (NYSE:IHS), the global leader in information and

“The easing of the twin headwinds of private sector de-leveraging and public
sector austerity will bolster the improved outlook, especially for the
developed economies,” Behravesh says. “Many emerging economies will also
likely enjoy stronger growth in 2014, pulled along by export-led growth to the
United States, Europe and China. That said, the global growth rebound is
likely to be quite modest.”

The global growth outlook for 2014 is the summary forecast in Behravesh’s
annual Top10 Economic Predictions, which were released today.

The U.S. economy is forecast to slowly speed up. The drag from fiscal policy
will be less, allowing underlying strengths in the economy -- such as housing,
the ripple effects of the boom in unconventional oil and gas production,
steady growth of consumer spending, and an uptick in capital spending -- to
become more visible, resulting in growth of 2.6 percent in 2014, compared with
1.7 percent in 2013.

Despite signs of weakness, the European recovery will continue, but at a very
sluggish pace. Forecast growth of 0.8 percent will be supported by very
accommodative monetary policy, stabilizing labor markets, less emphasis on
austerity, improved spending power, better competitiveness in peripheral
countries and greater confidence in Eurozone politicians to manage their
sovereign debt crisis. Germany and the United Kingdom will grow faster than
they did in 2013; Greece, Italy and Spain will struggle to attain positive

IHS expects China’s growth to inch up from 7.8 percent in 2013 to 8.0 percent
in 2014. The government is expected to apply additional moderate stimulus if
growth dips below 7.5 percent and stronger stimulus if it goes below 7.0
percent as China looks ahead to problems of an aging population and the
consequences of rapid credit growth, including a new housing bubble and rising
debt levels.

The other Top10 predictions include:

  *Other emerging markets will also perform a little better, with real GDP
    growth strengthening to 5.4 percent in 2014 from 4.7 percent in 2013. U.S.
    and Chinese growth will be stronger, and the Eurozone will no longer be a
    drag, resulting in emerging market exports becoming a source of growth.
  *Unemployment rates in advanced economies will remain high, dropping only
    to 7.9 percent in 2014 from 8.1 percent in 2013. Improved productivity
    will erode demand for labor, and aggressive cost-cutting will continue
    unabated. In the U.S., the unemployment rate is forecast to decline from
    7.5 percent in 2013 to 6.6 percent in 2014.
  *Commodity prices will go nowhere in 2014, as they did in 2013, as
    gradually strengthening demand is matched by higher production and ample
    inventories. Inflation will remain a low-level threat.
  *The Federal Reserve will begin scaling back stimulus, while other central
    banks will likely wait or provide more stimulus. The Fed is likely to
    start trimming its bond purchases no later than January 2014. The Bank of
    England is expected to raise interest rates in the second half of 2014.
    However, because of continued weak growth, the European Central Bank may
    engage in another round of Long-Term Refinancing Operations.
  *Fiscal headwinds, particularly in the U.S. (thanks to the recent budget
    accord) and Europe will ease. The U.S. federal budget deficit is expected
    to be unchanged from 2013 to 2014 at just under $700 billion, following a
    sharp drop from about $1.3 trillion in 2011. Easing fiscal pressure will
    also be evident in Europe and many of the Eurozone’s crisis economies will
    be given a little more time to meet their fiscal targets.
  *The U.S. dollar will strengthen against most currencies because U.S.
    growth will be strengthening, growth differentials with other advanced
    economies will be sizable, and the Fed is likely to remove stimulus sooner
    than most other major central banks.
  *There will be more upside risk than downside risk for the global economy:
    Stronger than anticipated growth in the U.S., U.K. and Germany, combined
    with better emerging markets performance in China, India and Brazil will
    likely surprise to the upside; instability in the Middle East and North
    Africa, additional fiscal drag, and disappointing news from emerging
    markets will persist on the downside.

For 2013, IHS forecast that global growth would hold steady at 2.6 percent and
it stabilized at around 2.5 percent. Nine out of 10 predictions for 2013 were
on the mark.

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Jim Dorsey, +1 781-301-9069
IHS Press Desk, +1 303-305-8021
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