Global Economic Forecasts: Q2 2018

Strategy Briefing

About This Report

May 2018

Global economy continues to perform strongly, both in advanced and emerging markets. Global real GDP expanded by 4.0% in Q4 2017. Growth was supported by higher investment activity in advanced economies, higher consumer demand in emerging markets, and a rebound in global trade. We expect global GDP to grow by 3.8-3.9% per year over 2018-2019, albeit with a gradual easing on the cards as central banks tighten monetary policy, US fiscal stimulus subsides, and China’s slowdown progresses.

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Global Economic Forecasts: Q2 2018

Global economic activity continues to perform strongly, both in advanced and emerging market economies

Global real GDP expanded by 4.0% in Q4 2017, which was notably above our baseline forecasts a year ago. Growth was supported by higher investment activity in advanced economies, higher consumer demand in emerging markets, and a rebound in global trade.

In the May 2018 baseline we forecast global real GDP to grow by 3.8-3.9% per year over 2018-2019, albeit with a gradual easing on the cards

As central banks tighten monetary policy, US fiscal stimulus subsides, and China’s slowdown progresses. Despite positive near-term economic prospects for the world, debt levels, financial market volatility, trade and geopolitical tensions pose a threat.

Our newly-introduced Global Downturn scenario captures hypothetical effects of the above downside risks

The scenario assumes escalating fears about trade wars and more populist policies, as well as concerns about overvaluation in financial markets, which could lead to a self-fulfilling sell-off in advanced economies, and through global spill-overs induce a slowdown in emerging markets. If materialised, these risks have the power to reduce global GDP growth by a cumulative 5.4% over the 3-year horizon.

Overview

Global Economy
Executive Summary
GDP Growth Forecasts – Revisions Over Last Quarter
Inflation Forecasts – Revisions Over Last Quarter
Interest Rate Forecast
Major Forecast Revisions

The US

General Outlook
Pessimistic and Optimistic Scenario
Private Sector Sentiment and Financial Markets
Monetary Policy and Credit Conditions
Aggregate Demand

The Eurozone

General Outlook
Pessimistic and Optimistic Scenarios
Private Sector Sentiment
Monetary Policy and Credit Conditions
Aggregate Demand

The UK

Economic Outlook and Brexit
Pessimistic and Optimistic Scenario
Labour and Private Sentiment
Inflation and Monetary Policy

Japan

Economic Activity
Pessimistic and Optimistic Scenario
Foreign Trade

China

General Outlook
Pessimistic and Optimistic Scenario
Global Risks
Aggregate Demand
Financial Conditions

Russia

GDP Growth
Pessimistic and Optimistic Scenario
Production and Wages
Inflation and Income

Brazil

Economic Activity
Pessimistic and Optimistic Scenario
Fiscal Accounts and Presidential Election
Foreign Trade

India

GDP and Components
Pessimistic and Optimistic Scenario
Industrial Production and Business Sentiment
Inflation and Monetary Policy

Risk Scenarios

Global Risk Scenarios
Scenario Descriptions
Scenario News

notes

Scope and Objectives
Definitions