The baseline projection for global growth in 2016 is a modest 3.2 percent, broadly in line with last year, and a 0.2 percentage point downward revision relative to the January 2016 World Economic Outlook Update. The recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies, as conditions in stressed economies start gradually to normalize. But uncertainty has increased, and risks of weaker growth scenarios are becoming more tangible. The fragile conjuncture increases the urgency of a broad-based policy response to raise growth and manage vulnerabilities.
The projected pickup in growth (3.2 percent) in 2017, reflects stronger performance in emerging market economies. Among advanced economies, growth is again projected to increase marginally, as the projected decline in growth in Japan due to the planned consumption tax increase is more than offset by slightly stronger performance in most other advanced economies.The outlook is weaker than that in the January 2016 World Economic Outlook Update for both advanced economies and emerging markets. Relative to the October 2015 World Economic Outlook, global growth has been revised downward by 0.4 percentage point in 2016 and 0.3 percentage point in 2017.
The modest euro area recovery is projected to continue in 2016–17, with weakening external demand outweighed by the favorable effects of lower energy prices, a modest fiscal expansion, and supportive financial conditions. Potential growth is expected to remain weak, as a result of crisis legacies (high private and public debt, low investment, and eroding skills due to high long-term unemployment), aging effects, and slow total factor productivity growth. Output in the euro area is expected to grow at about 1.5 percent in 2016 and 1.6 percent in 2017 and remain around 1.5 percent in the medium term.
Growth is expected to increase modestly in Germany (to 1.6 percent by 2017), France (to 1.1 percent in 2016 and 1.3 percent in 2017), and Italy (to 1 percent in 2016 and 1.1 percent in 2017). Growth in Spain is projected to soften (to 2.6 percent in 2016 and 2.3 percent in 2017) while remaining above the euro area average. Activity is expected to decelerate in Portugal (to 1.4 percent in 2016 and 1.3 percent in 2017), while Greece is expected to return to growth in 2017 after contracting further this year.
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