MOMR June 2016

World Economy

OPEC Monthly Oil Market Report – June 2016

World Economy

The risk to the global growth forecast is still tilted slightly toward the downside.

However, given some recent positive signals, the forecast remains unchanged at

3.1% for 2016, after estimated growth of 2.9% in 2015.

In the OECD, 1Q16 GDP growth in the US was revised up slightly, while in the

Euro-zone it seems to have continued its recovery. Japan, in turn, remains

challenged by both external and domestic factors. These counterbalancing

effects have kept overall OECD growth unchanged at 1.9% for 2016, after growth

of 2.0% in 2015.

India and China continue to expand at a considerable rate. After a strong 1Q16 in

India, the upside potential to the current growth forecast has become apparent.

Meanwhile, Brazil’s recession is ongoing, but the economy is expected to

recover to some extent in the 2H16. Russia is also forecast to remain in

recession this year, but to benefit from rising commodity prices.

Many country-specific economic challenges will need careful monitoring in the

near future, while geopolitical issues – and their potential to spill over into the

real economy – may add to the overall risk profile. The upside potential of the

current global GDP growth forecast could come from the US, India and the Euro-

zone. Central bank policies will also continue to constitute an influential factor

amid lower global inflation.

Table 3.1: Economic growth rate and revision, 2015-2016, %

OECD

OECD Americas

1Q16

GDP growth

was confirmed to be on the low side at 0.8% q-o-q, at a seasonally

adjusted annualized rate (SAAR), slightly revised up from the first estimate of 0.5%

q-o-q SAAR. Private household spending turned out to still be a source of solid support

with a growth rate of 1.9% q-o-q SAAR, unchanged from the first estimate. However,

the estimated decline in exports – amid a strong US dollar – as well as the continued

decline in investments in the energy sector, declining slowing productivity and a decline

in inventories, have all negatively impacted the growth pattern for the 1Q16.

Consumer sentiment, the Purchasing Manager’s Index (PMI) and other

business

sentiment indices

point at a strengthening during the 2Q16. But the magnitude of the

improvement remains unclear. Given that the latest labour market improvements have

World OECD US Japan Euro-zone China India Brazil Russia

2015*

2.9 2.0 2.4 0.6

1.5

6.9

7.3 -3.8 -3.7

Change from

previous month 0.0 0.0 0.0 0.1

0.0

2016*

3.1 1.9 2.0 0.5

1.6

6.5

7.5 -3.4 -1.1

Change from

previous month 0.0 0.0 0.0 0.0

0.0

Note: * 2015 = estimate and 2016 = forecast.

Source: OPEC Secretariat.