World Economic Prospects Monthly

Abstract

Overview: world GDP growth to pick up further in 2018 ▀ Recent developments suggest that the solid performance of the world economy is being maintained and that the omens for 2018 are positive. So we have raised our global GDP growth forecast for 2018 slightly from 3.0% to 3.1% – a little stronger than the 2.9% rise we expect this year and the best result since 2011. ▀ Global GDP probably expanded by 0.8% in Q3 for the second quarter running, which would mark the best six‐month growth performance since the post‐global financial crisis rebound in 2010. It is too soon to make strong judgements about the exact pace of growth in Q4, but as yet the business surveys and trade indicators show no obvious sign of a slowdown in the recovery or world trade growth. ▀ In response to the ongoing positive tone of the data, we have raised our 2018 GDP growth forecasts slightly for several economies, including the US, China and the Eurozone, in turn lifting our 2018 world growth forecast to 3.1%. We expect the recent healthy pace of trade growth to carry over into next year and have raised our world trade growth forecast for 2018 from 3.7% to 4.2%, before a modest slowdown to about 4% in 2019. ▀ Based on this and some modest upward revisions to our oil and commodity prices forecasts for 2018, prospects look more favourable for commodity exporters and economies that are heavily integrated into global manufacturing chains in both the advanced world and emerging markets. ▀ Political uncertainties remain a downside risk. But economic risks may be tilted to the upside, as we see only a gradual response by central banks to the favourable economic backdrop. Another upside risk is that the US government unleashes a €1.5trn fiscal boost, which is rather larger than assumed in our baseline. This could lift US growth in 2018 to 3% or so and would have spillovers for the rest of the world and make our baseline forecast for both trade and investment growth to slow look too cautious. But beyond next year, the real impact is more ambiguous as it would be likely to trigger a faster pace of tightening by the Fed.