Jeremy Glaser: For Morningstar, I’m Jeremy Glaser. Are China’s woes starting to impact global growth? Many organizations think so. I’m here today with Bob Johnson—he’s our director of economic analysis—to look at a recent report and get his take.
Bob, thanks for joining me today.
Bob Johnson: Great to be here today.
Glaser: Welcome back from sabbatical.
Johnson: Thank you so much.
Glaser: And you were greeted by a report from the OECD that says that global growth is set to slow in 2015. What did that report show? Why do they think growth is slowing so much?
Johnson: First of all, let’s talk about the growth rate. In 2014, according to the OECD report, the world economy grew at 3.3 percent. They are now saying that 2015 will be substantially slower at 2.9 percent, which is also lower than their previous forecast of 3 percent. Then, for 2016, they are projecting the economy will grow at 3.3 percent—also slightly slower than they had previously forecast. So, they’re clearly seeing 2015 as kind of a pivot year and then better luck in 2016.
Glaser: What’s driving this slowdown? Is it emerging markets? Is it developed markets? Who is slowing the most?
Johnson: It was probably more about trade than anything else. Certainly, China has slowed by country from what they had been growing, but not dramatically so. And the projections for 2016 are only slightly slower than in 2015. So, they are not seeing the big China slowdown that some people are projecting. But clearly, China is weighing on a lot of the data, and we could talk about the trade part of it in particular.
Glaser: Let’s look at that, then. Is global trade slowing?
Johnson: I think that was one of the things that really has the OECD people scared, and it was kind of a different take from that of the IMF and World Bank people who also do these kinds of projections. They said that world trade was not wonderful in 2014, at 3.4 percent growth. But are projecting it will drop at 2 percent in 2015. That’s quite a slowing, and trade that slow is generally associated with periods of recession. And trade is usually a good thing because countries specialize in what they are good in, you are going to have higher productivity, and you’ve got more avenues for growth for your country.
