Global Economic Outlook

Emerging economies have rebounded strongly, with developed economies following at a more modest pace. However, powerful and sustainable drivers of global economic growth are proving elusive.

As the global economy emerges from recession, developing countries are continuing to outpace the main developed economies in terms of GDP growth. Whilst all four BRIC countries are set for a strong rebound, China is the only large economy where the growth rate is approaching 10%. 

However, there are concerns about the sustainability of Chinese economic growth. Export-led growth was replaced with one fuelled by infrastructure investment, but also by government-sanctioned cheap credit. The government is now tightening lending conditions to prevent dangerous bubbles from developing.

With China still not a global economic growth engine, a significant recovery of the world economy will require more sustainable improvement in the main developed countries.  Although all five largest developed economies bar the UK grew in the third quarter of 2009, the recovery of the developed world is progressing slowly. 

Still, with China currently powering ahead and the US economy growing again, we forecast that in 2010 the world economy will expand by 2.8% measured at market exchange rates. At PPP rates, this year, global economic growth is forecast to reach 3.5%.