malaysiakini logo
story-image
mk-logo
News
Economic pundits forecast slow global economic growth
ADS

Economic pundits and crystal-ball gazers at the New York based Conference Board, a global, independent business and research association, predict in their latest Global Economic Outlook 2017 report that the geopolitical tensions, policy uncertainty, financial market volatility and rapid technological changes will pin the world economy to a slow growth path.

Conference Board presents its report to the international media on Wednesday.

Bart van Ark, the chief economist at the Conference Board, said that the report’s forecast, which was actually prepared in anticipation of an election victory by Democrat nominee Hillary Clinton, would not "significantly change at least for now, after the US election.

Like Conference Board, many organisations, think-tanks, research groups and others had assumed a Clinton victory but, instead, woke up on Nov 9 to find that Republican Donald Trump had won the election.

The report projects global GDP growth of 2.8 percent in 2017, a modest increase over 2.5 percent in 2016, contrasting sharply with rates of above four percent in the mid-2000s, and average 3.6 percent in the years 2010-15.

But van Ark qualified his remarks by saying that even this low baseline scenario faced considerable uncertainty in the next decade; seismic upheavals in the global trade system and other downside risks could detract another 0.9 percent from the projected growth over the next five years.

“It is now undeniable that the global economy is stagnant,” van Ark maintained.

Commenting on Trump’s victory and its economic implications, Gad Levanon, the chief economist for North America, said: “Donald Trump’s upset victory in the US presidential election further increases uncertainty over the fate of the global economy but - as of now - doesn’t alter our bottom-line growth picture.”

“Fiscal policy measures such as tax cuts and infrastructure investments may provide some growth upside for the US in the short term. But they’re likely to have only a manner impact on an economy that is beginning to reach full capacity and facing the prospect of impending interest rate increases, which may reduce the appetite to invest.”

The report recommends that businesses seeking to buck the slow-growth trend would need to develop agile strategies to overcome uncertainty, shocks and disruption. The ongoing digital transformation of economies offers upside potential, but fulfilling it will require a renewed interest in business spending.

With energy and commodity prices stabilising, resource-rich emerging economies, in particular, will see improved prospects in 2017. Global growth will improve slightly to an average of three percent in the years 2017-21 - or slightly over two percent in mature economies and around 3.7 percent in emerging markets.

However, annual global growth is projected to decline to 2.7 percent in 2022-26, as aging populations reduce labour supply in the mature economies and slow workforce growth in the major emerging economies. Van Ark alluded to the
remote possibility of recession if business profits continued to decline and losses were incurred.

“For the foreseeable future, the majority of global growth will continue to come from quantitative sources such as labour force growth and investment in structures and machinery,” said Ataman Ozyildirim, director of business cycles and growth research.

The US GDP is projected to grow two percent in 2017, up from 1.6 percent in 2016. Euro area GDP is projected to decline to 1.4 percent in 2017, down from 1.5 percent in 2016 while the GDP in the UK will grow just 0.8 percent in 2017, down from 1.7 percent in 2016, following the Brexit. Japan’s GDP is projected to grow 0.6 percent in 2017, down from 0.9 percent in 2016.

The picture among the giant emerging economies looks different. China’s GDP is projected to grow 3.8 percent in 2017, down slightly from 3.9 percent in 2016.

The Conference Board uses its own Chinese growth estimates which are different from the official figures of the Chinese.

Based on these figures, medium-term growth is expected to fall even further from China’s boom years to 3.3 percent on average in 2017-21 and a long-term trend of 2.9 percent in 2022-26.

India’s GDP is projected to grow 6.5 percent in 2017, down from 6.8 percent in 2016.

In response to a question from Bernama on the fate of the Trans-Pacific Partnership Agreement (TPPA), van Ark said that if the US killed the TPPA, China may step in and wean away the member countries with its own bilateral trading arrangements.

- Bernama

View Comments