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AB Sees Cyclical Renaissance for Global Economy

Economic forecast calls for 3.0% growth.

March 15, 2017

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omersgrowthThe global economic growth is on the rise despite market jitters over rising political risk according to the most recent outlook from AB. As the data indicate, the global economy is in the midst of a “cyclical renaissance” marked by factors such as the global manufacturing purchasing managers’ index (PMI), which has reached its highest level since June 2011.

According to AB’s own forecast, the global economy is expected to grow by 3.0% this year versus just 2.4% in 2016. If that happens, it would be the best performance since 2010 and the first time since that same year when AB hasn’t had to prepare a downward revision of its forecast.

Growth isn’t about to hit pre-Crisis norms however – but there are a few bright spots that make for a much rosier picture in 2017, including:

“…a highly accommodative policy mix (monetary and fiscal), the likelihood that the worst of the deleveraging cycle is over in key developed economies (e.g., the US), and the absence of major negative shocks.

Better growth is going to create a few challenges – rising inflation for one. And that could push central banks to rethink their approach to monetary policy which has been loose for a long time.

As the U.S. Federal Reserve raises rates and central banks in Europe and Japan stay the course with quantitative easing, the dynamic will create new pressures in the second half of the year, especially if European political risk becomes lower. That could also mean challenging times for bond markets.

AB’s outlook for global growth by country is below. You can read the full report here.

ab-world-economic-growth-forecasts-march-1

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