In its recent Global Economic Prospects report, the World Bank downgraded its 2015 global GDP forecast to 3.0 percent (from 3.4 percent in June 2014). However, FSG believes that their global forecast of 3.0 percent is still too optimistic, particularly in some key emerging markets.
For example, the World Bank is forecasting Venezuela to decline by 2.0 percent in 2015. Our analyst for Venezuela, Antonio Martinez, has a different forecast. He believes that Venezuela will decline by around 9.4 percent this year “as a result of a lack of adequate adjustment measures and limited financing opportunities for the government.”
Russia is also experiencing severe economic distress. The World Bank forecasts a decline of 2.9 percent, but Martina Bozadzhieva, Head of Research for Europe, Middle East, and Africa, is forecasting their decline at 4.5 percent. She explains that “currency depreciation will erode consumer spending, which has been one of the few drivers of growth in the past year. The combination of sanctions, currency depreciation, and very expensive corporate credit will depress the industrial sector and lead to another year of contracting investment. The government is looking at reducing their planned 2015 expenditure to align with lower oil price expectations. Collectively, these trends will result in a sharp contraction in GDP growth this year.”
Amidst all of this instability, there are still some bright spots according to FSG analysts, and Sub-Saharan Africa continues to be a growing opportunity for multinational corporations. Our analyst for Ivory Coast, Alexa Lion, believes that GDP will grow 9 percent this year, even faster than the World Bank’s forecast of 8.5 percent.
“A reduction in oil prices has already impacted prices at the pump, leading to greater disposable income and consumer spending. Large growth in gross domestic investment targeting infrastructures and a sharp increase in government spending, buoyed by a potential eurobond this year, will place Cote d’Ivoire as the fastest-growing economy in SSA in 2015,” she says.
FSG’s monthly forecast cadence allows us to keep multinational clients well informed of the many different scenarios which will affect the global macroeconomic environment, improving their ability to respond to and capture opportunity in emerging markets.
To track key revisions to your markets’ forecasts, FSG clients can use our FrontierView market tracking tool.
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*Lauren Goodwin contributed to this post.