Global Economy Watch

PwC's Macroeconomics team presents Global Economy Watch, a short publication that looks at the trends and issues that are affecting the global economy and details our latest economic projections for the world's leading economies.

The global economy has become much more energy efficient. But are there further gains to come?

This edition of Global Economy Watch focuses firmly on the outlook for the world economy. At a particularly turbulent political moment, this issue begins with an encouraging economic story: our ability to generate growth from energy is improving rapidly. This is a necessary development. Energy efficiency needs to get better if the world’s economies are to meet their climate change abatement targets while continuing to grow. PwC’s analysis suggests that the global economy has made significant strides in raising energy efficiency over the past 30 years, and our projections for the next 20 imply that there is still room for improvement. In this analysis, we identify two main drivers of this trend: structural change within large emerging markets and broader technological developments. There are important lessons for business too: energy efficiency will be increasingly insisted upon by consumers and regulators alike.

In our second article consider if recent lacklustre growth in the global economy is likely to deteriorate. Certainly, the outlook for the world’s biggest economies is less bright than it was 18 months ago.

In early 2018 we witnessed the fastest and most synchronised growth since before 2008/09 global financial crisis. Since then, the deepening of the trade conflict between the US and China, and challenges in Europe and slow-growing emerging markets have transformed sentiment among businesses and policymakers.

However, we note that slower growth in 2019 in each of the crucial markets of the US, China and the Eurozone is to be expected. The US benefited from a one-off tax cut in 2018. The Chinese government continues to cool its economy very gradually, while the Eurozone is correcting after a couple of years of abovetrend growth in 2016-17. That these three economies have cooled simultaneously has been alarming, but fundamentals remain relatively strong. One point of caution: if conditions deteriorated suddenly, central banks would find it difficult to deliver the sort of boost they were able to supply in 2008/09. For businesses, some solid operating conditions are undercut with appreciable downside risk.

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Senior Economist Mike Jakeman examines the link between economic growth and energy consumption and suggests that the world economy is becoming more energy efficient.

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Barret Kupelian

Senior Economist

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