ESADE Economic Report predicts 3 percent global GDP growth in 2015
According to ESADE’s first-semester Economic Report, made in collaboration with Banc Sabadell, the global economy will grow by more than 3% in 2015 – as it did in 2013 and 2014 – but will not reach pre-crisis growth rates. The report also predicts that the developed world will grow by 2.5% and that the emerging economies will post growth rates of at least 5%.
According to the report, the United States, Canada and the United Kingdom will be the fastest-growing economies in the developed world. The factors favouring growth in these countries include falling oil prices, monetary policy measures such as those introduced by the Federal Reserve and the Bank of England, and the loosening of fiscal adjustment measures. The report also highlights the risks associated with geopolitical tension in the Middle East and the escalation of the conflict in Ukraine.
The report places particular emphasis on China’s economy, which grew by 7.5% in 2014. Chinese reforms aimed at increasing economic sustainability will make for slightly slower growth in 2015, although the country’s growth rate will remain above 7%. The Japanese economy, which grew by 0.5% in 2014, will see growth of just over 1% in 2015, in keeping with the country’s two-decade-long trend of stagnation.
Europe: from unconventional monetary measures to monetary and fiscal expansion
The eurozone GDP grew by 0.8% in 2014, and the new report predicts 1% growth in 2015. The increase in growth will be modest due to high levels of public and private debt, high unemployment rates, and low, fluctuating levels of aggregate demand. An additional danger is posed by deflation, which forced the European Central Bank (ECB) to resort to unconventional monetary policies. These policies – intended to alleviate the economic slowdown and improve the flow of credit to households – are insufficient, in the view of the report’s authors, who suggest a policy mix similar to that adopted by the United States, Japan, the United Kingdom and other countries since the onset of the economic crisis in 2007.
Such a policy mix would entail a multifaceted expansion programme. The first element of the programme is monetary expansion, a measure already adopted by the ECB. Equally important is the second measure, namely, the adoption of an expansive fiscal policy. Additionally, public deficit reduction requirements should be made more flexible to avoid hindering hinder already weak growth. And finally, the linchpin of the expansion programme is the European Investment Plan, or "Juncker Plan", which calls for public and private resources to be mobilised for education, research, innovation, and infrastructure construction, with the aim of increasing the eurozone’s economic productivity. In its current form, this programme is likely to be insufficient.
Regarding one of Europe’s greatest concerns, the ESADE Economic Report stresses the importance of reaching a good outcome in negotiations with Greece. If this happens, the ECB could start to buy Greek debt as soon as July 2015, as long as Greece does not declare its intention to default on the bonds purchased by the European Financial Stability Facility (EFSF) since May 2010. The withdrawal of any country from the eurozone is an outcome that should be avoided.
Towards stable growth for the Spanish economy
According to the new report, the Spanish economy will grow by nearly 2% in 2015. Although Spain is on the road to recovery, many factors continue to prevent the country from growing more quickly. The stagnation of the European economy is one such factor, according to Josep M. Comajuncosa, Associate Professor in the Department of Economics at ESADE and co-author of the report. "Stagnation could occur again, in a third recession, if the authorities and the member states fail to find a balance between monetary expansion, fiscal adjustments and structural reforms," explained Prof. Comajuncosa.
The Spanish economic growth predicted by the new report will be brought about by more favourable financing conditions, a lower risk premium, a slight increase in household consumption, net job growth, and a decrease in the cost of raw materials, especially oil. However, in addition to threats emanating from Europe, several other factors could slow down Spain’s recovery, primarily the fact that unemployment and debt – both household and corporate – remain high. The new report suggests four fundamental measures aimed at preventing these factors from throwing Spain off the path of economic growth: debt-reduction assistance for companies, additional labour-market reforms, better financing conditions for companies and individuals, and additional capitalisation for the financial sector.
The ESADE Economic Report argues that greater productivity is the key to increasing competitiveness. According to Prof. Comajuncosa, "Productivity is the most important challenge for Spain’s economy in relation to the standard of living of Spanish citizens, maintaining the welfare state, and making the Spanish economy fit into the EU Economic and Monetary Union."
