The recovery in global growth will be a slog in 2016 and relies primarily on consumer spending holding up in the face of higher US interest rates, rising inflation and political uncertainty, Morgan Stanley says.
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The investment bank's forecast for global real gross domestic product growth in 2016 is 3.3 per cent, up from 3.1 per cent this year. This will be the fifth year global growth remains below its long-term average of 3.6 per cent, chief European economist Elga Bartsch wrote in a research note.
"The global economy is projected to remain on an expansion path, though the recovery remains distinctly subpar, with risks skewed towards the downside," Ms Bartsch said.
Two themes will swing the outlook for global growth between recovery and recession next year: the resilience in consumption in developed markets and the state of the adjustment in emerging markets.
For developed markets, tighter monetary policy and recovering oil prices are the biggest threats to consumer spending, which was the biggest source of growth in 2015 through jobs growth, wages growth, cheaper petrol and accommodative monetary policy.
Interest rate rises in the US and Britain, a looming election in the US and a referendum in Britain on remaining in the European Union, as well as recovering oil prices, may curb consumer spending in those areas. Elsewhere in developed markets, private consumption should remain steady.
"At the margin, we expect fiscal policy to turn more supportive of growth, with the agreement of the US fiscal package," the bank said.
"[There is] potential additional spending in the euro area, due in part to the influx of refugees, which will also be supportive of consumption prospects."
Emerging markets remained in "adjustment" phase, and their contribution to global growth hinged on the extent of China's economic slowdown, the effect of a stronger US dollar on US interest rate rises, and capital flows on economic stability.
"With real rates remaining high as [emerging markets continue] on the adjustment path, a number of them, though not all, are likely to see improvement in macro-stability indicators including their current account balances and inflation."
Societe Generale is also forecasting better growth prospects in 2016, which will be good news for equity markets. The bank predicts the global bull market has further to run, with the end not in sight until the second half of 2017.
Its preferred equity markets in 2016 were in Europe, with Italy and France favoured, and the sectors set to benefit were oil and gas, banks and construction.