Improvements in the global economy are likely to continue in 2017 also thanks to more stable commodity prices in 2017.
Improvements in the global economy that have started in the second half of 2016 are likely to continue in 2017. After estimated growth of 3.0% in 2016, global economic growth is expected to pick up in 2017 to reach 3.2% (Graph 1). Support is coming from the OECD group of countries with growth of 1.9% in 2017, compared to 1.7% in the previous year. GDP growth in China and India are forecast to slightly decelerate, yet still remain strong. The stabilisation of oil markets seen since the OPEC – Non-OPEC Declaration of Cooperation has helped to support upstream Capex spending and improve oil producers’ income, adding to global economic growth.
Higher-than-anticipated economic growth may come from the US and the Euro-zone, as well as Japan to some extent. Upside potential also exists in the emerging economies of China, India, Brazil and Russia. At the same time, political and economic uncertainties could hamper the global economy from further and faster improvements, including upcoming elections in major European economies, developments regarding Brexit, and fiscal, monetary and trade policies.
In the US, labour market improvements have continued to support the economy and significantly lifted consumer sentiment. At the same time, industrial production has started to pick up, while being supported by the recovery in oil prices. In recent months, US domestic consumption has turned out to be particularly supportive for the economy and the return of the investments in the oil industry is expected.
However, uncertainties regarding both the consequences of new economic programmes, as well as the impact of the normalisation of monetary policies remain. In this respect, upcoming budgetary discussions in combination with the expiry of the debt-ceiling suspension in mid-March will need close monitoring. In the Euro-zone, the economic recovery continues, supported by domestic improvements, but also by the ECB’s extraordinary monetary stimulus.
The ongoing weakness in the banking sector – including continuing sovereign debtrelated issues in Greece – may weigh on the region’s near-term growth. Meanwhile, Japan’s governmentled stimulus has lifted momentum, with most economic indicators pointing to the upside. As a result, GDP is expected to rise marginally in 2017.
Within emerging and developing countries, growth trends are likely to vary once again in 2017. Brazil and Russia are expected to recover at different levels from two years’ recession, partly due to the lower commodity prices. Despite a somewhat slowing momentum, GDP growth in both China and India is holding up well.
The rise in commodity prices has provided vital support to the economies of several developing countries. Meanwhile, the increase in commodity prices has positively lifted inflation in advanced economies to healthier levels, providing major central banks some room to normalise their monetary policies.
Global trade is also likely to benefit from more stable commodity prices in 2017. The rebalancing of the oil market, driven by the recent successful OPEC – Non-OPEC Declaration of Cooperation, is likely to further enhance the global oil industry, leading to even more global economic growth and hence higher oil demand growth in 2017.