There is good news for the global economy in 2018. According to CNBC’s article, Emerging Market Set to Drive Global Growth – World Bank, 2017’s growth rate is expected to rise slightly from 3.0% to a rate of 3.1% in 2018. While this sounds like a modest improvement, it is noteworthy that this rate of growth represents the first time the world economy will achieve its potential since 2008, when the Great Recession devastated developed and emerging economies alike, taking a full decade to fully recover and resume full growth rates for the global community at large. CNBC reports that this growth can be attributed to emerging economies with growth rates peaking at rates as high as 4.5 percent.
East Asia and the Pacific Fuel World Market Optimism
Another force driving optimism high is how well China and East Asia are expected to perform. China’s economy is predicted to improve by 6.4 percent in 2018. While a slowing trend is expected for 2018, the 6.3 percent growth rate expected is certainly nothing to worry about. Even more surprising are the forecasts for India where GDP growth is predicted to hit 7.3 percent in 2018 before topping out at an impressive 7.5 percent high, as projected by the World Bank.
CNBC’s reported projections anticipate a growth of 2.2 percent in 2018, down slightly from the 2.3 percent rate in 2017. The explanation for this cooling off is attributed to the removal of crisis mechanisms by central banks to prop up the economies after the 2008 financial debacle. Considering the optimism of East Asia and Pacific markets as compared to the developed economies of the US, the average impact fuels global optimism, overall. One of the only concerns that has recently creeped into the picture relates to President Trump’s threat for protectionist policies that could restrict free trade with tariffs. It is still too early to know what the total impact of these tariffs will be.
Poor Country Expansion
There is some good economic news for poorer countries, according to the CNBC article, Emerging Market Set to Drive Global Growth. Latin America, the Middle East and Asia are predicted to increase by 5.4 percent. Respectively, this includes a whopping 8.3 percent growth rate in Ghana and an 8.2 percent increase in Ethiopia. The only loser in this region appears to be Venezuela, a country expected to lose 4.2 percent.
The United Nations report, World Economic Situation and Prospects attributes much of the good news to macro prudential measures designed to manage financial economic weaknesses that can compromise economies. In developed countries, the United Nations expects monetary stimulus packages to be withdrawn in response to continued growth and favorable market conditions. In spite of risks that remain a concern for the economies of developing economies, the United Nations views favorable investment prospects for South and East Asia to continue.
-Davenport Laroche, Hard Asset Alternative Investments Worldwide