Global economic growth is expected to accelerate

Posted in Carpe Diem Blog The chart above displays annual world GDP growth rates (adjusted for inflation) from 1980 to 2012 (actual) and 2013 to 2017 (projected), using data from the International Monetary Fund’s (IMF) World Economic Outlook Database.  According to its most recent “World Economic Outlook” (released January 23), the IMF is reporting 3.2% real growth in world GDP for 2012, which is expected to increase to 3.5% this year and 4.1% next year. Economic growth is expected to be especially strong this year and next year in China (8.2% and 8.5%), India (5.9% and 6.4%) and sub-Saharan Africa (5.8% and 5.7%). For the years 2015-2017, the IMF projects above-trend growth in world output of about 4.5% in each year. The chart above also shows the steep, upward trend line for world real GDP since 1980. Due to increased productivity, technological improvements, greater world trade, and the spread of free market capitalism around the world among other positive long-term trends, the trend in world economic output has increased by a full percentage point in the last thirty years (see blue trend line above), from less than 3% in 1980 to 4% today.  And just a one percent increase in the growth rate of real output makes a big difference over time – at 3% growth, real world GDP would grow from the current level of $70 trillion to $302 trillion in 50 years; at 4% growth, real world GDP would be 60% higher in 50 years at $485 trillion. Bottom Line: Despite a global slowdown, and a severe financial, mortgage and housing crisis in the US, the world economy contracted in only one year, with negative growth of 0.57% in 2009; and that was followed by a healthy rebound of 5.1% real economic growth the following year. One year of a contraction in global output doesn’t seem so bad during a 35-year period of strong global expansion, characterized by a positive upward trend in world economic activity that has boosted the annual growth rate in global output by a full percent since 1980.