Navigating policies for the new normal

Global growth in 2014 was yet again lower than initially expected, continuing a pattern of disappointing outturns over the past several years. Growth picked up only marginally in 2014, to 2.6 percent, from 2.5 percent in 2013. The global growth outlook for 2015 is not rosier either: it is expected to rise moderately to 3 percent, and an average about 3.3 percent through 2017.

Several major forces are driving the global outlook: soft commodity prices, persistently low interest rates but increasingly divergent monetary policies across major economies, and weak world trade. In particular, the sharp decline in oil prices since mid-2014 will support global activity and offset some of the headwinds to growth in oil-importing developing economies. However, it will continue to dampen growth prospects for oil-exporting countries, with significant regional repercussions.

Risks to this slow-moving global recovery are tilted to the downside. If the eurozone or Japan slips into a prolonged period of stagnation or deflation, global trade could weaken further.