World Economy Set to Grow at 3.2% This Year: AB

Global growth on track for 2018, despite challenges: report

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omersgrowthThe global economy is expected to grow around 3.2 per cent in 2018, in line with last year, but there will be many challenges throughout the remainder of the year, according to AllianceBernstein’s mid-year outlook.

The firm noted that while signs point to increasing inflation over the long term, it doesn’t expect to see an exaggerated level this year, keeping global inflation at 2.8 per cent.

Broadly, world currencies are set to remain fairly stable, with the U.S. dollar biased to the upside and Japan’s yen under some pressure from the country’s central bank lagging in the global process of monetary policy re-normalization. Europe could see a little trouble, noted the outlook, forecasting that the euro will trade at the lower end of its current range, as Italian political upheaval has proven a thorn in its side.

Looking ahead to the later half of the year, the outlook characterized the relatively healthy American economic backdrop of the second quarter as “dashing any lingering concern that a sluggish first quarter signalled the start of a new trend.”

It also noted that direct effects from trade tensions, led by the United States, are likely to be limited. However, reduced business investment and market contagion from worry over tariffs are still major risks.

For the Eurozone, Italy presents the freshest bit of downside risk, with increasing volatility stemming from the new government’s tense attitude toward the rest of Europe.

In China, the renminbi is under pressure as trade shots are fired by the Trump administration. However, AllianceBernstein doesn’t expect the Chinese government will artificially lower its currency as a competitiveness strategy, as some have suggested.

As with the United States, the growth outlook for Canada is positive, although not excessively so. Continuing trade issues between Canada and the U.S. remain the biggest downside risk for the country.

While healthier interest rates in developed markets are a good sign for growth in general, they can squeeze emerging market segments, the outlook pointed out. For Latin America, heightened U.S. protectionism, geopolitical concerns the world over and a strengthening U.S. dollar will all be challenges for the region.

For Eastern Europe, the Middle East and Africa, domestic market central bank policy and rising bond yields also present a challenge for account deficit countries like Turkey, the report noted.

This article first appeared on our companion publication website, BenefitsCanada.com 

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