General economic environment

Economic experts are expecting global economic trends in the current year to be similar to those seen in 2015. The international forecasting institute Oxford Economics1 is therefore projecting an increase in global gross domestic product (GDP) for the full year 2016 of 2.3 percent. Growth in 2015 was 2.4 percent. Oxford Economics is forecasting an increase in global industrial production (IP) for the full year 2016 of 1.9 percent (2015: 1.8 percent).

The main factors influencing the global economy are economic trends in the emerging nations of China, Russia and Brazil and movements in the price of oil.

The Chinese government is continuing to support increases in productivity, domestic demand and innovative capacity by pursuing a stable monetary policy and by adopting further macroeconomic regulatory measures. GDP in China is expected to grow by 6.2 percent in 2016 (2015: 6.9 percent). It is anticipated that industrial production there will increase by 5.2 percent in 2016, compared with IP growth of 6.0 percent in 2015.

The forecasts for Russia are significantly worse. The continuing low price of oil remains the driving factor for economic trends in Russia. In addition, sanctions are having an adverse impact there on economic growth. Economic experts are predicting a 2.4 percent decline in the Russian economy in the current year, compared with a fall of 3.7 percent in 2015. Industrial production is expected to drop by 1.0 percent in 2016, compared with a fall of 3.0 percent in 2015.

Brazil is also heavily dependent on movements in the price of oil. Moreover, the current political crisis in that country is having a negative impact on economic growth. Economists are therefore forecasting a fall in GDP in Brazil of 4.0 percent in 2016, compared with a drop of 3.8 percent in 2015. Industrial production is expected to shrink by 7.1 percent, following a fall of 8.2 percent in 2015.

In the EMEA region (Europe, Middle East, Africa), economists are expecting an increase of 1.5 percent in economic output, the same as was achieved in 2015. Industrial production is forecast to grow by 1.3 percent. In 2015, IP increased by 0.9 percent. There is a great deal of variation in the projected trends for individual regions. The forecasts for Germany and the eurozone might still be relatively cautious, but they are nevertheless slightly above the actual figures for 2015. GDP in the eurozone is projected to rise by 1.6 percent in 2016, compared with an increase in 2015 of 1.5 percent. The forecast for GDP growth in Germany is 1.7 percent, compared with an increase in 2015 of 1.5 percent. In the UK, the economic experts are projecting GDP growth of 2.1 percent (2015: 2.3 percent). Relatively positive trends are also expected in the Middle East, with GDP projected to rise by 1.3 percent. However, the forecast growth there is significantly below the figure for 2015 of 3.1 percent. In Eastern Europe, a slight increase in GDP of 0.4 percent is expected, compared with a fall in 2015 of 0.6 percent. In South Africa, Linde’s largest market in Africa, economic output is forecast to rise by 0.7 percent, compared with an increase of 1.3 percent in 2015.

As in previous years, the Asia/Pacific region is expected once again to achieve the highest rates of growth. Oxford Economics is forecasting GDP growth in that region for the full year 2016 of 5.4 percent, compared with the increase of 5.6 percent achieved in 2015. In addition to China, India is one of the main growth drivers in this region. GDP in India is projected to increase by 7.4 percent (2015: 7.3 percent). Industrial production in India is forecast to rise by 4.5 percent, once again exceeding the growth rate set in the previous year. In 2015, IP growth in India was 3.2 percent.

In Australia, the forecasting institute is predicting GDP growth of 2.8 percent (2015: 2.5 percent). This increase will come primarily from the expansion of the service sector, which dominates the Australian economy, generating around 80 percent of the country’s GDP. Growth in manufacturing will continue to be adversely affected over the coming years by the decline in investment in the mining industry.

In the Americas region as a whole, economic output is currently expected to rise by 1.3 percent in 2016 (2015: 1.5 percent). The main driver of this trend is the United States, where GDP growth of 2.1 percent is being forecast in 2016 (2015: 2.4 percent). Boosted by expected gradual adjustments to monetary policy and by domestic consumption, economic trends in the United States are expected to be solid. In South America, the decline in growth is expected to continue, with a fall of 2.4 percent in GDP in 2016, following a drop of 2.1 percent in 2015. The main reasons for the decline are the current situation in Brazil and the economic crisis in Venezuela.

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