Global Economic Prospects and Challenges in 2016 With the beginning of the New Year, it is a perfect time to reflect on how the global economy fared in 2015 and on what's in store for 2016. The global economy had a bumpy 2015. Advanced Economies: The diverging policies in Europe and the United States will solidify a trend that has been underway for many months: The curo will weaken further and the dollar will grow ever stronger. What's more, the rising dollar over the last year has already had profound effects. It has helped account for the drop in commodity values, which are commonly priced in dollars and has punished many commodity-producing nations, like Brazil, Russia, Saudi Arabia and Canada At the same time, the dollar has helped put a lid on inflation in the United States while hurting the competitiveness of American exporters and contributing to weakening global economic demand. A strong U.S. dollar has continued to weigh on carnings, particularly for companies with significant international exposure and is likely to do so in 2016. Those effects are widely expected to strengthen, not weaken, in the months ahead. China: The big question for Chinese authorities is how they will trade off near-term growth against longer term sustainability. On this, China's latest Five Year Plan implies an average target for economic growth of 6.5% through to 2020. That is a step down from the 7-8% pace over the past four years. Markets are concerned about a sharper deceleration, with the focus of attention on weakness in the manufacturing sector. But, while the "old world" economy slows, activity within the new world has quietly forged ahead. Service sector activity is almost 50% of overall output, up from 40% just eight years ago (Short.)