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World Economic Prospects Monthly
Publication year - 2018
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/1468-0319.12368
Subject(s) - protectionism , economics , trade war , china , international economics , international trade , pace , inflation (cosmology) , trade barrier , balance of trade , baseline (sea) , commercial policy , investment (military) , political science , law , physics , geodesy , politics , theoretical physics , geography
Overview: Activity holding firm in the face of trade risks▀ Latest data suggest that global economic momentum remains firm despite persistent trade policy uncertainty. On balance, we still see world GDP expanding 3.1% this year before slowing slightly to 2.9% in 2019. Trade tensions continue to run high overall, despite some positive developments, namely the effective truce between the US and Europe and renewed progress on NAFTA talks. But as a result of the apparent breakdown in US‐China trade negotiations, we have pencilled in additional US tariffs of $50 billion on imports from China . ▀ Recent survey data indicate that businesses and consumers are becoming more worried about the impact of protectionism. Our latest Global Risk Survey echoes these concerns: trade war fears dominated our Q3 survey to a greater extent than any other risk since the survey's inception. Our baseline forecast assumes that rising protectionism, along with ongoing trade policy uncertainty, will weigh on global activity, particularly on investment and trade. Looking ahead, world trade is expected to grow at an annual pace of about 4% in H2 2018 and 2019, down from an estimated 5.6% in H1 2018. ▀ Also contributing to somewhat softer global activity going forward will be cooler US economic growth, which we think is now past its peak. Firmer inflation, tighter Fed policy, and a weaker growth impulse from tax cuts will cap US growth at around 2.7% on average in H2 2018. Meanwhile, trade worries and a squeeze on personal incomes mean quarterly eurozone growth is unlikely to break out of its recent 0.3–0.4% range. ▀ Our emerging market (EM) growth forecasts are unchanged at 4.6% and 4.5% for 2018 and 2019 respectively. On the China front, while persistent trade uncertainty and the continued weakening of the CNY merits close scrutiny, the resilience of the economy and the authorities' willingness to ease policy if growth falters help mitigate our concerns for the domestic economy, as well as for the overall EM complex.