Washington, D.C., February 20, 2015 - The global economy is gradually gaining momentum, led by the U.S. and Euro Area economies, but emerging economies are lagging behind, according to the IIF's latest Global Economic Monitor.
Overall, global growth is projected at 3 percent in 2015 and 3.3 percent in 2016, up from 2.6 percent in 2014. The IIF raised its forecast for mature economies by 0.2 percent to 2.3 percent, in part because of the benefits of lower oil prices on consumption. However, the outlook for emerging markets has been marked down by around half a percentage point.
"We are witnessing unusual divergences in the global economy," said Charles Collyns, chief economist at the IIF. "Where U.S. growth and a pick-up in Euro Area growth should push global growth up to its highest rate since 2011, many emerging markets are not yet sharing in the upswing, held back by home-made problems which offset some of the positives."
The IIF reported that lower oil prices have lowered inflation globally, and many emerging market central banks have taken the opportunity to ease monetary policy.
' "Some central banks in emerging markets with elevated underlying inflation may regret current easing steps as the year progresses as stress from higher U.S. rates sets in and oil prices firm somewhat from their very low levels," said Felix Huefner, chief economist for global macroeconomic analysis at the IIF.
The top risk to the global economy continued to be the possibility that the Fed could trigger an exit from zero interest rates a sharp bond market correction given the wide disparity between market rate expectations and the Fed's signals about its interest rate path. This event could have a negative impact across emerging markets, particularly those with greater external vulnerabilities.
The report also highlighted concerns about slowing growth in China, deepening disinflation in the Euro Area, continuing geopolitical risks from the Ukraine and Russia conflict, and renewed concern about possible Greek exit from the Euro Area.
The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. Within its membership IIF counts commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.