The global economy is set to strengthen slightly over the next two years, thanks to accelerated growth in the US and G20 emerging markets. In its latest Global Macro Outlook, Moody’s has predicted that the global economy will grow by three per cent in 2017, and 2.9 per cent in 2018, up from 2.6 per cent this year. The US economy is expected to “bounce back” next year, with a forecast of two per cent for 2017, and 2.1 per cent for 2018, up from a disappointing 1.6 per cent this year.
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However, economic activity in the UK is expected to weaken, with growth of just one per cent expected next year and the year after. The below-average expectations are due to “uncertainty about its future economic path” following the Brexit vote. Moody’s had previously forecast economic growth of 1.2 per cent for the UK in 2017.
“We believe that despite growth stabilisation, medium term risks have risen,” said Elena Duggar, associate managing director at Moody’s Investors Service. “Financial market reaction to the outcome of the US presidential election has been muted so far. However, an increase in volatility due to heightened policy uncertainty could potentially dampen global growth prospects. Medium-term uncertainty remains around China’s growth outlook, financial market volatility around US interest rates normalization and the potential scaling back of monetary policy stimulus in the euro area.”
The report, which is updated every quarter, concluded that economic growth in 2017 “will remain at historically low levels with several downside risks”, and named 2016 as having the “slowest growth in global economic activity since the financial crisis.”
However, strong prospects for the G20 emerging markets will fuel growth in the global economy. Countries such as Brazil, Russia and Argentina are expected to return to growth next year, while accelerated growth has been predicted in South Africa and Saudi Arabia. Overall, emerging market economies are expected to grow by five per cent in 2017, up from 4.4 per cent in 2016, surpassing the growth projections of developed economies such as the US and the EU.