Key topics of global economy in 2018

15.02.2018

Leading international financial institutions consider their duty to share short-term forecasts of economic development with society.

UkrAgroConsult wants to introduce you a predictive estimate of BMI Research, a part of the well-known group of companies Fitch, regarding the main global economic trends of 2018.

First of all, we are talking about the outstripping growth rates of developing economies, which exceed growth rates of developed countries by almost 100%: this year emerging markets will increase 4.8%, including China (compared to 4.7% in 2017), while developed markets will remain at the 2.2% plateau. Without China, emerging markets will grow by nearly 3.8%.

Secondly, commodity prices will be cooled down after a strong growth before 2018. In comparison with 2017, in 2018 the price increase should be more gradual. Prices for meat and grain will not be much higher than in 2017.

Price grains

Then, in 2018 central banks will be aimed at tightening monetary and credit policy in both emerging and developed markets. For the first time, global central banks, led by the US Federal Reserve System (FRS), will try to exit quantitative easing policy successfully. After an average annual asset purchase rate at USD 1.2 trillion in 2009-17, in 2018 the FRS, the Bank of England, the European Central Bank and the Bank of Japan will reduce their purchases to USD 500 billion and stop doing it before 2020.

Fourthly, the pressure of demand from growing global economy and rising crude oil prices mean that consumer price inflation will be more prone to growth than to reduction. In 2018 BMI Research forecasts global inflation at 3.0% (compared with 2.7% in 2017), and this will be the highest level since 2012.

Price pressures

Fifthly, in 2018 the US protectionism policy will be strengthened within the framework of Trump governance. For instance, this will affect restrictions on steel and aluminum, which will follow restrictions on solar panels and washing machines, which were introduced in mid-January 2018. BMI Research still sees the 30% chance of disrupting negotiations on the US-led review of the North American Free Trade Agreement (NAFTA) and expects aggressive trade talks with China in the coming months. There is a risk that such actions of the USA will generate a reciprocal increase in tariffs against the US commodities by the major trading partners.

US protectionism

However, despite Trump administration’s actions, the rest of the world continues to become increasingly trade-integrated, especially emerging markets.

A special point is the estimated probability of a new Korean war. BMI Research estimates its possibility at 30%. This trend may increase after the Winter Olympics by July (the 65th anniversary of the Korean War) and by September 09 (the 70th anniversary of DPRK creation). However, the "limited US strike" can lead to a full-scale war and, as a result, to collapse of the South Korean economy, as well as global supply chains and increased risks in financial markets.

And, finally, BMI Research believes that main areas for regulation in the market will be the following:

  • Data protection
  • Crypto currency
  • Telecoms
  • Transport
  • Renewable energy
  • Gig economy - a modern model of economy, which assumes free and short-term form of "employment" - freelancing.

In 11 months, the above forecasts will become either a reality or conjecture.

 

UkrAgroConsult

 

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