Ifo World Economic Climate Brightens: Results of 128 World Economic Survey (WES) for the Second Quarter 2015

The Ifo indicator for the world economy has risen over the previous quarter. Both the assessments of the current situation and the expectations improved. The WES experts expect world economic growth to be 2.3% this year. The global economy is slowly regaining momentum. The economic climate improved significantly in Europe, and especially in Central and Eastern Europe. In Asia, it brightened slightly, again reaching its long-term average. In North America, the indicator fell by nearly 10 index points, but remained well above its long-term average. In the CIS countries, the economic climate recovered slightly, but remains well below its long-term average. In the Middle East and Latin America, the indicator continued to decline, falling to its lowest level in nearly six years. According to the WES experts, economic growth is expected to accelerate this year in Europe to 1.7%, and the United States to 2.7%. In contrast, the expected growth rates for Latin America (1.3%) and Asia (3.6%) are below the previous year. For Russia and the Ukraine, the experts predict a deep recession. For 2015, the survey participants expect a global average price increase of 3.0%, slightly less than at the beginning of the year (3.1%). Inflation expectations for the euro area amount to 0.6% this year, still clearly below the ECB target of almost 2%. The medium-term inflation expectations for 2020, however, have risen to 2.0% and now largely correspond to the ECB inflation target. The global average interest rates of the central banks and thus the short-term interest rates will remain largely stable, while the long-term capital market interest rates over the next six months are likely to rise moderately. More WES experts than in the previous survey appraised the US dollar as overvalued, and see the euro and the Japanese yen as undervalued. In contrast, the exchange rate of the pound sterling is viewed as appropriate.