According to IHS Economics, the world economy shows potential to grow at or above average rates for the next several years. Low oil prices and increased consumer confidence will be key near-term drivers, while pent-up demand and available production capacity provide longer-term potential. However, economic and social reform toward sustainable growth in developing, emerging, and advanced economies alike will be needed to realize long-term economic growth.
In the nearer term, global economic growth continued accelerating in 2014, putting the world economy on an increasingly firm footing. Further moderate economic acceleration, helped by lower oil prices and monetary policy stimulus (most prominently in Europe and Japan), characterizes the medium-term forecast.
Although effects differ from country to country, lower oil prices represent a net gain for global economic growth as resources are shifted to more efficient economies on average, and consumer spending is stimulated in the world’s largest oil-importing economies. As a net beneficiary of low oil prices, the United States will be a locomotive of global growth, with a steadily improving labor market likely bolstering domestic demand even after the effects of cyclical oil prices diminish.
Europe and Japan, meanwhile, show signs of a gradual recovery as decisive monetary stimulus in each region serves as a tailwind to economic growth, and structural reforms undertaken in several European economies will slowly pay off in higher growth rates. Revived economic activity in these key global markets will stimulate global trade to achieve growth rates nearing long-term averages.