According to a recently released economic report by BNY Mellon, 4% to 4.5% is the expected global GDP growth rate for 2010 and 2011. The strong growth experienced during the first few months of 2010 is at the upper part of this percentage range while 2011 growth may be at the lower end of the range because of recent indications showing a slower pace of expansion in many countries.
In China, policies to freeze a property boom have appeared to work, causing a weakened demand for materials in that sector, BNY Mellon Chief Economist Richard Hoey predicts. It’s also likely that the Chinese economy made a transition from an unsustainably overheated economy to an economy growing at a lower but sustainable rate.
In Europe, the serious financial stresses on sovereign bonds and financial firms may gradually ease, and over the course of the coming years, the European financial sector will undergo a multi-stage recuperation, Hoey said. Overall, Europe’s economic expansion growth pace is at its relatively low trend growth rate. But growth trends differ in various regions. The regions with the most strength are Germany and core Europe. Germany’s strength lies particularly in exports that benefit both from global expansion and the more competitive euro. The peripheral European countries should experience weakness from both tight credit conditions and tight fiscal policy.
A sustained subpar expansion is expected in the U.S. with a below normal recovery pace from a severe recession. Recent evidence indicates a slower growth rate is real. The expected U.S. real GDP growth rate ranges between 2.5% and 3% in 2010, a “modest slowdown” instead of a “major slowdown” or “double dip recession,” Hoey said. In the second quarter of 2010, weaker real net exports and a strong surge in imports drains growth, while the homebuyer tax credit weakens residential construction in the third quarter of 2010.
While the U.S. outlook for 2011 is uncertain and will be affected by macroeconomic policy decisions, the expected 2011 real GDP growth is 2.5% to 3.5%, according to the report. However, growth rates can be potentially higher if growth friendly policies such as “competitiveness agenda” are adopted.