World Economic Prospects Monthly

Abstract

Economic OutlookVolume 42, Issue S7 p. 1-29 Article World Economic Prospects Monthly First published: 25 July 2018 https://doi.org/10.1111/1468-0319.12367AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Abstract Overview: global growth stands firm despite trade risks ▀ Protectionism worries, the weak Chinese yuan and the growing risk of a hard Brexit have clouded the economic horizon. But for now, the activity data remain resilient to these concerns. On balance, we still see global GDP expanding by a healthy 3.1% this year and 2.9% in 2019, unchanged from last month. ▀ The risk of protectionism snowballing has risen in response to President Trump's latest threat to implement tariffs on another €200bn of Chinese imports. While our baseline assumes some escalation — we have pencilled in additional US tariffs of $50bn on both Chinese and EU imports, which are reciprocated — Trump's announcement shows that the risk of an even sharper escalation remains. What is more, the recent depreciation of the CNY has raised renewed concerns about capital outflows that could trigger financial instability in China and even a liquidity shock. ▀ Meanwhile, although political events in the UK have on the face of it created a shift in favour of a ‘soft’ Brexit, parliamentary arithmetic still points to a significant chance that any such deal is voted down, resulting in an economically damaging ‘hard’ exit. ▀ But while the downside risks have risen, the global expansion remains resilient. The global composite PMI strengthened again in June and points to only a moderate growth slowdown. And in the advanced economies, there is some encouraging evidence that firms are raising capital spending despite ongoing uncertainties. Meanwhile, although China is in the eye of the protectionist storm, the possibility of more modest policy tightening and the recent strength of some of the economic data has led us to raise our GDP growth forecasts slightly for this year and next. ▀ Despite the difficult start to this year for emerging markets, we expect EM GDP growth to slow only marginally to 4.5% in 2019. China's resilience, our expectation that the CNY will not weaken much further and that the recent period of dollar strength will be reversed as US growth slows more rapidly than elsewhere are all positive for EMs. Volume42, IssueS7July 2018Pages 1-29 RelatedInformation