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2018 World Economic Outlook
By Mr. Crowd 3 Jan 20189:25
World economy are doing well in 2017 as major economies delivered growth in GDP and strong corporate earnings. There was no material black swan event in the global economy, political and policy in 2017. Although investors generally expect global economic outlook to remain optimistic in 2018, whether asset prices will be affected by political instability in 2018 is one of the major focus. Investors are cautious about German Chancellor Angela Merkel’s coalition talks, Brexit, and tension with North Korea.
The International Monetary Fund (IMF) raised its estimate for global economic growth in 2017 and 2018 on October 10. IMF increased its growth forecast to 3.7 percent in 2018, 0.1 percent higher than the original projection from July.
Meanwhile, financial markets had a stunning year in 2017. In the US, the Federal Reserve’s gradual tapering did not bring any negative impact to the overall economy. The European Central Bank and the Bank of Japan had maintained their accommodative policy.
Investors expect the Fed to raise interest rates three to four times in 2018 and the central bank continues to adopt a gradual path of rate increase.
However, the Organisation for Economic Co-operation and Development (OECD) predicts that the UK economy will slow rapidly in 2018, as the UK heads towards a hard Brexit.
Elsewhere in Europe, Germany’s severely weakened chancellor, Angela Merkel, is struggling to forge a coalition government. This create difficulties for France and Germany – the twin engine of European integration – to agree on the necessary reforms to shore up the euro zone.
China policymakers are expected to remain focused on reducing financial risks and deleveraging parts of the financial system. But China's leadership is likely to remain committed to doubling GDP between 2010 and 2020. As a result, China's GDP growth target for 2018 is expected to be "around 6.5 percent" and policymakers may make efforts to gradually, rather than suddenly, slow down credit growth in the coming years.
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