Global Economy Reviews
06.03.2017 21:26 World Economy Review - February 2017
The Organization for Economic Co-operation and Development (OECD) stated that the United States, Japan, Germany and France are all showing signs of economic growth. Forecasts from the OECD are expecting GDP growth in the aforementioned countries to pick up.
The Paris-based organization said its leading indicator (CLI) which purpose is to signal early hints of turning points in economic activity, remained just below its long-term average of 100 at 99.9 for the second consecutive month.
Here are the readings for the following countries:
• United States - reading climbed from 99.3 in November 2016 to 99.4 the next month.
• Japan - November`s reading was at 100 and rose to 100.1 in December.
• Germany - From 100.3, the reading moved higher to 100.5.
• France - its November reading of 100.5 edged up 100.6 in the succeeding month.
Meanwhile, Britain`s reading recovered to 99.5 in December from 99.3 in the preceding month.
The OECD described the country as having indefinite indications of accelerating growth, adding that terms regarding its withdrawal from the European Union still affect the British economy negatively.
“In the United Kingdom, there are tentative signs of growth gaining momentum, although the CLI remains below trend and uncertainty persists about the nature of the agreement the UK will eventually conclude with the EU,” the organization said.
Elsewhere, after a deep recession, Portugal`s economy is steadily recovering thanks to a broad structural reform agenda that has led to improving economic growth, declining unemployment numbers and impressive progress in export performance.
According to a report from the OECD, keeping the momentum for additional reforms is vital to address the remaining challenges and bring about stronger and more inclusive growth.
Additionally, the latest OECD Economic Survey of Portugal also indicates the necessity to lower high levels of public and private sector indebtedness and address non-performing loans in the banking system, which are hindering investment and restraining growth and productivity. The share of non-performing loans in the financial sector makes up over 12% of total loans and is one of the highest levels among European countries.
In Europe, Portugal still has one of the most unequal income distributions. The survey said that the country would need to overcome its legacy of a low-skilled labor force. Enhancing the skills of all Portuguese citizens will definitely boost growth, and will be essential in addressing the inequality.
The OECD also reported that economic inequality has accelerated faster in Sweden than any other developed country in recent decades as top earners have cashed in on growing asset prices while immigrants and unemployed citizens have been left behind.
Nonetheless, the gap between top and bottom earners remains tighter in the Nordic nation than most countries, the OECD added.
However, while real incomes for the wealthiest 5% of the Swedish population have risen nearly 70% since 1990, the poorest 5% have only witnessed a 10% growth.
“Income inequality rose more rapidly than in any other OECD country since the 1990s,” the OECD report read. “The rise in income inequality needs to be contained.”
Sweden has been widely regarded as an example of a country that demonstrated fairness and equality, using high taxes to stabilize income difference and support the poorer citizens through high welfare spending.
A rising stock market since deregulation in 1990s and soaring house prices have benefited those with financial assets, however, while fortunate capital gains taxes in relation to income taxes have further benefited the rich.
The OECD also indicated that increases in benefits have slumped wages while high levels of entry wages makes it tough for several lower-skilled individuals, usually many of whom are foreigners, to get jobs.
“More than 30% of the foreign born fell below the poverty line,” the OECD reported.
The government stated that the Swedish population rose by over 100,000 in 2014 - the result of a then-record high immigration of 127,000 and births outnumbering deaths.
07.02.2017 22:02 World Economy Review - January 2017
The global economy was set to accelerate over the next two years but there were uncertainties around exactly what policies the US would put in place and several emerging market economies were now seen growing more slowly, the International Monetary Fund said.
In an update of its October 2016 World Economic Outlook forecasts, the IMF said global gross domestic product would expand at a 3.4% clip in 2017 and by 3.6% in 2018, which was unchanged from its prior projections.
The new set of forecasts included assumptions for a changed policy mix in the States and a higher price of oil, the Fund said. However, advanced economies were now seen expanding slightly more quickly and emerging ones, where financial conditions have generally tightened, a tad more slowly.
Among the former, the IMF now expected saw the US growing at a pace of 2.5% in 2018, which was four tenths of a percentage point more than previously expected.
In parallel, the UK was seen growing 1.4% in that year, versus a prior forecast of 1.7%. That was more than offset by an upwards revision to the IMF`s 2017 projection from 1.1% to 1.5%. Italy on the other hand was now seen growing less in both 2017 and 2018, by 0.7% and 0.8%, respectively, instead of by 0.9% and 1.1%.
Emerging market and developing economies would grow by 4.5% and 4.8% over those same two year, with the former being one tenth of a percentage point less than previously anticipated.
Growth expectations for the Asean-5 and India in 2017 were marked down, as well as those for Latin America and the Caribbean and the Middle East for both years.
Saudi Arabia fared particularly poorly, with the Fund`s economists` new forecasts calling for an expansion of 0.4% and 2.3%, which were 1.6 and 0.3 percentage points than the IMF said in October.
At 0.2%, Brazil`s economy was now seen expanding 0.3 percentage points less quickly in 2017. Mexico would also grow 0.6 percentage points less in both years, with GDP increasing 1.7% and 2.0%.
On a more positive note, the forecast for Chinese GDO growth in 2017 was revised from 6.2% to 6.5%. Despite its markdown for India, the Subcontinent was still seen clocking in with growth of 7.2% and 7.7% over the same time horizon.
09.01.2017 18:54 World Economy Review - December 2016
Economists at HSBC raised their forecast for global growth and inflation over the next two years based on robust manufacturing activity, a resilient China and above all the fiscal boost expected to come in the United States.
It was the first time in nearly five years they have upped their growth and inflation outlooks over a two-year horizon as 2017 gets underway and as investors prepare for U.S. President-elect Donald Trump entering the White House.
The British economy appears to be in ruder health than had been anticipated expected following the country`s decision in June to leave the European Union, while Japan, Germany and Spain are also looking brighter, HSBC said.
The bank now sees the global economy expanding at a 2.5 percent pace this year compared its with 2.3 percent forecast in September, and 2.6 percent next year, up from September`s 2.5 percent.
Global inflation looks set to be 3.0 percent this year and 2.7 percent next year, compared with their previous forecasts of 2.7 percent and 2.5 percent, respectively, the bank said.
"All of the above help explain why we can offer a rare treat: for the first time since early 2012, we are increasing our forecasts for both global growth and inflation for the next two years," the bank`s team of economists led by Janet Henry, chief global economist, said in a note.
"Unfortunately, it is still a world where global growth is likely to hover around the mediocre growth rates of the past few years."
HSBC`s projection for US GDP growth in 2018 saw the sharpest upwards revision, from 2.2% to 2.7%, while growth in the euro area was now pegged at 1.3%, three tenths of a percentage point more than previously anticipated.
Nevertheless, whereas prices in the States were only expected to rise a bit more quickly than before (2.3% versus 2.1% for 2017 and by 2.1% against 2.0% in 2018) in the Eurozone they were seen gaining 1.6% in 2017 and 1.3% in 2018.
Previously the economists had seen the Eurozone`s CPI rising by 1.0% in both years.
Emerging markets were now seen growing 4.1% and 4.5% in each of those years, down from HSBC`s prior projections for growth of 4.3% and 4.6%.
In the case of the Russian Federation, the rate of expansion in 2017 was now pegged at just 1.0%, instead of 1.5%, while in Brazil the economy would only expand by 0.7%, that was four tenths of a percentage point less than HSBC had expected in September.
The uncertainties facing the UK in its Brexit negotiations and the medium-term outlook for growth were described as "huge". Despite that, the UK now saw GDP expanding at a 1.2% clip in 2017, up from 0.7% before, while consumer prices would advance a tad less rapidly, by 2.8% instead of the 2.9% previously anticipated. For 2018 on the other hand, HSBC cut its projection for Britain`s GDP from 1.6% to 1.3%.
06.12.2016 21:00 World Economy Review - November 2016
The Organization for Economic Cooperation and Development on Monday upgraded its global economic outlook for 2017, as growth will be supported by fiscal stimulus despite weak trade and investment.
Although uncertainty remains about the US economy following the election of Republican Donald Trump and over Britain`s exit from the European Union, the OECD raised its growth forecasts for major economies. Still, it warned of rising protectionism that could weigh on economic growth.
The OECD now expects the global economy to expand 3.3% next year, up from a 3.2% growth forecast in September. In 2018, the world`s economy is projected to grow 3.6% in 2018, the body said in its report.
The Paris-based organization said fiscal stimulus and progress on trade policy will help the global economy out of its "low-growth trap".
But it added that "worsening protectionism and the threat of trade retaliation could offset much of the fiscal initiatives` impact on domestic and global growth, leaving countries with a poorer fiscal position as well."
Japan`s economy is expected to grow 1%, the OECD said, upgrading the outlook from 0.7%. The world`s third-largest economy is expected to register 0.8% growth in 2018.
The OECD said the Bank of Japan should keep its monetary easing policy until inflation is stable above 2%. It added that the implementation of a "more detailed and credible consolidation plan, including a path of gradual increases in the consumption tax rate, is essential" to sustain confidence in Japan`s public finances.
The US economy is expected to benefit from Trump`s "expansionary" fiscal stance. The OECD projects a 2.3% expansion in gross domestic product, larger than its previous estimate of 2.1% for 2017. The economy is expected to grow 3% in 2018.
"The new administration will begin implementing its policy priorities next year and in this context the fiscal stance is projected to become more expansionary as public spending and investment rise, while taxes are cut," the report said. "This will provide a boost to the economy, particularly in 2018."
The Eurozone economy is expected to grow 1.6% in 2017, up from 1.4%, before expanding 1.7% in 2018. The outlook for the British economy was revised to 1.2% growth from 1% as the OECD expects a 1% expansion in 2018.
"The unpredictability of the exit process from the European Union is a major downside risk for the economy," the report said. "Improved prospects of an orderly exit from the European Union while retaining strong trade linkages with the bloc would support near-term growth more than projected."
The organization lifted its projection for the Chinese economy to 6.4% from 6.2%.
07.11.2016 15:33 World Economy Review - October 2016
The five-member bloc saw a 5.8 per cent growth in containerized trade with the world in the first half of 2016 on the back of a strong showing by India, says Maersk Line, the world`s largest container shipping company.
"BRICS export-import containerized trade with the world registered a growth of 5.8 per cent in the first half of 2016 as against de-growth of 2.2 per cent in the same period last year," it said.
This growth for BRICS, it said, was "led by India followed by China and is forecast to gain pace next year as Brazil and Russia are expected to emerge from recession, contributing to higher GDP expansion".
Volumes should improve as GDP for BRICS is expected to increase to 5.7 per cent in 2017, an improvement over the previous forecast of 5.3 per cent.
"China is expected to grow more than 6 per cent in 2017, India at 8 per cent, Brazil at more than 0.5 pr cent and Russia at above 1 per cent," it said in a release here.
Economic uncertainty has been a deterrent to investments in infrastructure, which is critically important to help countries lower their supply chain cost and consequently boost exports as well as improve competitiveness.
According to Maersk Line, if a country is able to lower trade costs by 10 per cent, exports can increase by more than 20 per cent.
The heads of BRICS countries are meeting in Goa this weekend to discuss improving collaboration and increasing trade.
While 2016 did not start positively for the world, India paced up in the first half of this year. This growth was on the back of a strong US economy and recovery in the European market.
"That said, it is worth mentioning that trade among BRICS countries continues to grow although China remains BRICS` as well as India`s largest trading partner responsible for 82 per cent of Indian containerized trade." Franck Dedenis, MD, India, Sri Lanka & Bangladesh Cluster, Maersk Line, said: "India export-import trade with BRICS nations has been consistently growing at 4 per cent since 2012." He further said recovery in Brazil and Russian economy is "good news" for BRICS and it might entail an increase of trade among India and China in 2017.
"We are also noticing some interesting trends that are beginning to emerge of late. Rise of India, Thailand and Vietnam as alternative sourcing markets to China can put some pressure on China in future," he said.
China, Maersk said, remains India`s strongest trading partner followed by Russia and Brazil. India`s export-import trade with BRICS nations was strong at 6.5 per cent and 7.8 per cent, respectively, in 2015 and 2016.