Global Themes Update: The Outlook For Fixed Investment

Our global macroeconomic themes feature this week is on fixed investment. The full feature is available to subscribers at Business Monitor Online, but we highlight some of the key points below:

  • Weak fixed investment growth is damaging the potential economic growth trajectory in Europe and the US. At this stage, though, we expect to see an improvement in developed market fixed investment relative to emerging markets.
  • In emerging markets, the impact of rapid investment ranges from the benign (particularly for economies that still have low capital stock and are embarking on catch-up growth) to the systemically destabilising. Overall, the continued rapid expansion in emerging market fixed investment suggests that global rebalancing still has a long way to go.
  • We forecast fixed investment in China to be much more muted over the next decade than the previous one. This helps inform our below-consensus real GDP growth forecasts for China.
  • We project Russia, Turkey, South Korea, Chile, Peru and Brazil to disappoint in terms of fixed investment over the next couple of years, while central Europe, Mexico, the Philippines, Indonesia, Malaysia, and the Gulf Cooperation Council states have relatively bright outlooks.