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‘POLITICAL RISKS REMAIN’

Global economic growth seen at 2.8pc this year

AMSTERDAM, April 13, 2017

Buoyed by a strong US economy, as well as improving outlooks for many emerging market economies, world economic growth is forecast to increase 2.8 per cent in 2017, compared to 2.5 per cent in 2016, a report said.

However, substantial downside risks remain, according to the latest Economic Update from Atradius, a global provider of provides trade credit insurance, surety and collections services.

After the March increase in the US policy rate, markets have priced in two more hikes this year, with the earliest one expected in June.

US monetary policy normalisation could hurt some emerging markets with large external vulnerabilities. The likelihood has increased that the Trump administration may not be able to achieve many of its aims, including pro-growth measures such as infrastructure spending. This had led investors to pay more attention to the downside risks of the Trump presidency, notably those stemming from protectionism and aggressive foreign policy actions.

There is a broad trend toward populism in western democracies. Political uncertainty has risen following the Brexit decision, the election of Donald Trump and the outcome of the Italian constitutional referendum. The next big test will be the presidential election in France. The net effect of further increasing uncertainty would be negative for global GDP growth, as business investment would be postponed and international trade could slow down further.

Protectionism and anti-trade policies are a major concern amidst this political uncertainty, threatening the outlook for international trade in 2017. In 2016, the volume of global trade slowed to only 1.3 per cent, according to the Netherlands Bureau for Economic Policy Analysis, the slowest pace since the global financial crisis.

This slowdown was primarily due to lower demand for goods, but finally there have been signs of a rebound since Q4 of 2016. With stronger global GDP growth prospects, Atradius forecasts world trade to pick up to 3 per cent in 2017.

Backed by the Opec supply deal, oil prices have stabilised in the $50-60 range per barrel of Brent. However, oil prices are too low to enable a significant revival. The US Energy Information Administration forecasts oil prices to level off in 2017, averaging $55 per barrel.

Eurozone – The Eurozone is expected to continue its steady, moderate expansion in 2017, but the uncertainty surrounding this outlook is high due to elections in large EU member states and to the uncertain outcome of the Brexit process.

Advanced Markets – Economic growth in the US and the UK is anchored by strengthening labour markets. The US outlook for 2017 is robust, but in the UK, higher inflation and political uncertainty will increasingly weigh on growth.

Emerging Markets – Emerging markets face reasonable growth rates this year, as a number of key countries emerge from recession. However, the Trump presidency poses significant downward risks to some emerging markets.

Credit and insolvencies – The corporate insolvency environment is expected to be relatively stable in 2017, but is subject to downside risks stemming from political uncertainty. – TradeArabia News Service




Tags: Opec | GDP | Global economy | Trump |

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