Commenting in its Cyclical Outlook and Investment Themes report, Pimco said it expects the increase in global year-on-year growth in 2015 to be propelled largely by supply-driven declines in oil prices.
“Pimco expects global growth to accelerate in 2015, from around 2.5 per cent (year-over-year) this year to 2.75 per cent next year – an incrementally rising tide, we could say,” the report said.
“The majority of this improvement comes from our view that supply-driven declines in oil prices serve as a fundamentally positive terms of trade shock for a majority of global economies,” it said.
“And further, the transfer of incremental petrodollar cash flows from producers to consumers will result in the acceleration of money velocity, which will also support higher economic growth next year,” the report said.
Pimco also said, in regards to inflation, declining oil prices will have a downside impact on global inflation readings in 2015.
“In most developed economies, headline inflation will likely go into negative readings in the early part of 2015, only to bounce back toward positive core inflation readings as we go into late 2015 and early 2016,” the report said.
The global asset management firm also pointed out that while global growth is likely to surprise on the upside in 2015, there will be large differences in growth dynamics between net consumers and net producers of oil.
“Among the major economies, the biggest beneficiaries from a decline in oil prices are expected to be Japan, the Eurozone, China, India and the US. On the other end of the spectrum, Russia and to a smaller extent Brazil stand to suffer from oil price declines next year,” the report said.
