Our Back to the Future Economy: Most of Today’s Trends Reminiscent of 1980s and 1990s, IHS Chief Economist Says

BRICS gap widens as developed economies take lead; Oil price plunge to transfer $1.5 trillion to consumers

With many of today’s economic trends reminiscent of the 1980s and 1990s, we are looking at a ‘Back to the Future’ scenario for the global economy says Chief Economist Dr. Nariman Behravesh of IHS, Inc. (NYSE: IHS), the leading global source of information and analytics.

“Once again the US is a locomotive of global growth, the dollar is resurgent and US oil production is set to be the highest in the world,” he said at the World Economic Forum in Davos, Switzerland.

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Oil Price Plunge and Global Growth

“Everyone right now is talking about the impact of the oil price plunge,” Behravesh said. “While clear winners and losers are being created, the net effect will be positive as roughly $1.5 trillion in wealth is transferred from producers of oil to consumers of it. This will translate to an additional 0.3 to 0.5 percentage point to world growth.”

As a point of reference, the 67 percent drop in oil prices in 1985 and 1986 was followed by a global boom. While three decades later the global environment is different, and a boom may not be in the offing, the big drop in oil prices will help growth.

“Despite multiple divergent trends, global growth is likely to accelerate a little in 2015,” he said. “Falling oil prices and more stimuli from key central banks will boost global growth in 2015 to 3.0 percent from 2.7 percent in 2014.”

BRICS Gap Widens as Developed Economies Take Lead

“The divergence in the performance of the big emerging markets is getting wider,” Behravesh said. IHS expects the Russian economy to contract by 4.0 percent this year and the moribund state of the Brazilian economy to continue.

On the other hand, growth prospects in emerging markets such as India, Indonesia, Poland and Turkey look bright. India in particular looks very promising, with growth rates that could exceed that of China in the next few years.

US growth will remain solid, despite weakness in other parts of the world and plummeting oil prices. The US economy should be able to grow by 3 percent in 2015 without too much trouble. “Strong domestic demand growth will, as it has in the past, provide a strong foundation and buffer for the US economy,” Behravesh said.

Eurozone’s Lackluster 1.4 Percent Growth

A Greek exit is a low-probability scenario, which, if it happens, will not derail the Eurozone recovery. Even if Syriza wins the upcoming Greek snap election, the probability of Greece leaving the Eurozone is less than 20 percent.

If such an exit does occur, the contagion effect for the rest of the Eurozone will be small, given the ECB’s promise to do “whatever it takes” to prevent a financial meltdown.

Nevertheless, Eurozone growth in 2015 will only be a lackluster 1.4 percent.

About IHS (www.ihs.com)

IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape today’s business landscape. Businesses and governments in more than 150 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs about 8,800 people in 32 countries around the world.

IHS Inc.Amanda Russo, +44 781 460 3420Amanda.Russo@ihs.comorPress Team, +1 303 305 8021press@ihs.comFollow us on Twitter: @ihs_news

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