World Economy

Global Growth Speeding Ahead

Innovation and technology are helping drive  business growth throughout Asia.Innovation and technology are helping drive  business growth throughout Asia.
The rising euro poses a threat in Europe and could challenge the ECB as it moves to end its QE by the end of the year

The global economy is expected to grow at a robust pace this year and reach an altitude not seen since 2010, as momentum builds in developed economies and inflation revives, Reuters polls of over 500 economists showed.

Major central banks are expected to move away from ultra-easy monetary policy this year, but borrowing costs are still accommodative and should underpin growth.

The latest Reuters polls taken this month, covering more than 45 countries, not only underscored optimism on growth but also showed inflation forecasts were either upgraded or left unchanged in nearly 70% of those economies.

“For the first time in a long while, global growth is speeding up away from its average rather than recovering back towards it,” said James Sweeney, chief economist at Credit Suisse. The global economy is predicted to grow 3.7% this year, the fastest since the 4.3% in 2010.

That was an upgrade from the 3.6% predicted in October’s poll but lower than the International Monetary Fund’s outlook of 3.9% growth this year.


Nearly 70% of over 140 respondents who answered an extra question said the global economic boom was more likely to gain momentum this year and push inflation higher than currently predicted.

Those expectations were largely driven by growth in developed economies, particularly the eurozone. United States may not be firing on all cylinders but enough to keep things rolling.

Surging business and consumer confidence and steady job creation have left economists repeatedly raising growth estimates for the eurozone and its major economies.

The rising euro poses a threat in Europe and could challenge the European Central Bank as it moves to end its money printing by the end of the year. “All the conditions for the classic macroeconomic sequencing of a growth phase have now come together. All the countries in the EU have not only seen a return to positive growth but are showing a marked acceleration in activity,” wrote Michael Carey, chief US economist at Credit Agricole CIB, in a note.

“The ECB has again signaled that, despite the improved growth prospects, the process of monetary normalization will be slow, and it has managed to lock market expectations into its timetable.”

But for Britain, above-target inflation and a buoyant job market won’t push the Bank of England to tighten policy until at least November as it waits to see how divorce talks with the EU develop.

One conclusion from the latest surveys was inflation expectations, which showed the risk is now skewed more to the upside with last year’s pessimism somewhat tempered.

Trade Protectionism

While economists previously had repeatedly warned about “deep uncertainty” to the global economy from protectionist policies, particularly on US President Donald Trump’s “America First” trade policies, the latest polls showed that was slowly fading.

Indeed, over 80% of nearly 140 economists who answered a separate question said any significant barriers to global trade in 2018 were unlikely. “Global trade barriers are, definitely, a downside risk to our forecasts this year, but is not our baseline case. No country will benefit from erecting trade barriers, so we see such an outcome as still unlikely,” said Scott Anderson, chief economist at Bank of the West.

But the remaining 24 respondents said some barriers were likely to emerge. A few hurdles mentioned were the North American Free Trade Agreement talks, Brexit negotiations and rising risks of a US trade war with China.

A majority of economists in a separate Reuters poll last week said NAFTA will probably be renegotiated successfully with no significant changes, despite the Trump administration’s saber-rattling.

Asia Upbeat

If there was one message to come out of the Asian Financial Forum in Hong Kong last week, it is that things are looking up for the global economy. The risks that exist have more to do with politics than economic growth, Business Inquirer reported.

The next 12 months should bring relatively stable growth in Asia, North America and Europe, powered by ongoing improvements in economies around the world and a significant dose of innovation in areas from technology to finance.

That seemed the fairly consistent message from the forum, the giant annual gathering in Hong Kong of finance and business professionals, economists and policymakers, held on Jan 15-16. The theme of this year’s event, Steering Growth and Pioneering Innovation: Asia and Beyond, was appropriate to the mood.

For Asian economies, the prospects are also positive, particularly for economies linked to China. “Driven by synchronized growth across trade, investment and industry, the markets have been on a bull run for a long stretch,” said Vincent Lo Hong-sui, chairman of the Hong Kong Trade Development Council.

“Added to this has been low inflation and monetary policies that have helped businesses, markets and investors alike. Advances in technology have also brought fresh impetus to growth. I believe the key to sustaining the momentum for growth lies in investment and innovation.”

Innovation and technology are helping drive business growth and motivating leaders throughout Asia and beyond to pay more attention to investment in these areas. Hong Kong offers an almost ideal example for the region of how to benefit from technology.

The focus on technology and the sheer potential of its markets has made Asia a magnet for the best companies in the world and, increasingly, the birthplace of many. Of the top 500 global companies ranked by Fortune in 2017, 194 were Asia-based, up 56% from a decade ago.

According to the International Monetary Fund, China is a key partner for more than 100 countries that represent 80% of global GDP. The growing Belt and Road Initiative, the signature trade and connectivity plan first launched by Chinese President Xi Jinping in 2013 that spreads across more than 60 countries in Asia, Europe and Africa, has emerged as an important catalyst of growth.


Add new comment

Read our comment policy before posting your viewpoints