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Global Economic Outlook

Strong economic growth

In Q1 2017 the global economy was driven by strong growth in manufacturing & trade and The International Monetary Funds (IMF) latest report shows that the broad based growth will continue through 2018. Strong growth in global trade, industrial production, and improvements in the Purchasing Manager’s Indices (PMI) is projected to drive the global economic growth.

Strong growth was driven by large emerging and developing economies such as Brazil, China, and Mexico, and in developed economies including Canada, France, Germany, Italy, and Spain.

The growth in developing economies will outpace the growth in the developed economies by 2 to 3 times. In 2017 the developed economies will contribute 2 percent and developing economies will contribute over 4 percent to the global growth.

In 2018 the growth contribution gap will widen, the developed economies are projected to contribute 1.9 percent and developing economies will contribute over 4.8 percent.

Growth enablers

  • Global output is projected to grow by 3.5 percent in 2017, very much in line with April 2017 World Economic Outlook projections.
    • US contribution has been slightly down graded than in April
    • Growth for Japan and Eurozone as been revised up
    • Growth for China was also revised up driven by strong Q1 & Q2 2017 performance
  • IMF projects global output to increase by 3.6 percent in 2018
  • Commodities and inflation: Concerns have subsided. Concerns about higher oil prices and inflation have reduced significantly.
  • Bond and equity markets: Long-term bond yields have recovered for developed economies. In the US Federal Reserve raised short-term interest rates, however markets are optimistic about growth and stability. Equity prices remain strong in the developed economies, oil prices are projected to soften.
  • Currency and investments. Recently Euro has strengthened and US dollar has depreciated by 3.5 percent. Investments and capital flows in the emerging economies such as China and India remain high.

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Developed economies outlook

  • United States: Growth forecast was revised down to 2.1 percent for 2017 and 2018 as a result of slower growth in Q1 2017 and fiscal policy related uncertainties
  • United Kingdom: Uncertainties resulting from Brexit continue to present challenges for the UK’s economy, its growth forecast was revised down for 2017.
  • Eurozone: Growth forecast was revised up for countries including Germany, France, Italy. Spain’s forecast was also revised up as a result of recovery in tourism industry.
  • Canada & Japan: Growth forecasts were revised up marginally based on consumption, investment, and exports growth.

Developing economies

  • China: Solid growth is expected as a result of strong performance in Q1 & Q2, growth forecast remains at 6.7 percent for 2017. Economists projects a slightly slower growth rate of 6.4 percent for 2018.
  • India: Growth is projected to be around 5 percent for 2017 and 2018. Strong growth in industrial production, domestic demand and infrastructure investments are the primary growth drivers.
  • Eastern Europe and Latin America: Strong growth is projected in 2017 and 2018.
  • Other regions: Growth rates are projected to be modest for the rest of the regions, as a result of recent decline in oil prices.

Images courtesy of The International Monetary Fund

Blog post by Ketan Deshpande, Minnesota, MN

 

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