How has the World Economy fared in 2017 ?
According to the latest World Economic Outlook, released by the International Monetary Fund (IMF) last October 2017, the global economy is strengthening and looking brighter. With a broader based economic recovery, the IMF estimates that the global growth in 2017 will increase to 3.6%, up from 3.2% and 3.4% in 2016 and 2015 respectively.
However, there are still many risks that can sap the fragile economic recovery. With the Brexit negotiations still ongoing, the full impact on the British economy and the European Union (EU) are still unknown. As for the United States (US), the trade policies of the Trump administration are becoming more and more protectionist. On top of all these, not only are the central banks of the major economies undergoing tapering of their economic stimulus, but they are also reviewing their monetary policies and hiking gradually their interest rates.
" With a broader based economic recovery, the IMF estimates that the global growth in 2017 will increase to 3.6%, up from 3.2% and 3.4% in 2016 and 2015 respectively. "
Advanced Economies Recovering
Ten years passed since the Global Financial Crisis in 2008 affected the whole world. The Group of Seven (G7) largest and most advanced economies went into recession, contracting the global economy by 0.1% (GDP at constant prices) in 2009. All the G7 countries went through massive economic stimulus with their respective central banks doing quantitative easing as well as adopting a zero - and even negative in some instances - interest rate policy.
The recovery from the financial crisis among the developed economies has been long and arduous with the EU and Japan still having their main policies for stimulating their respective economies in place. For 2017, according to the IMF, the economic recovery in most developed economies is showing signs of strengthening further.
The American economy contracted for two years in 2008 and 2009, contracting by 0.3% and 2.8% respectively, according to IMF data. Since then, the policymakers have been able to steer the economy on the path of recovery. For 2017, the US economy will grow by 2.2%, compared to 1.5% in 2016. However, Trump's "America First" policies as well as a more protectionist approach to trade by his administration will eventually affect the economy in the future.
As for the EU, not only it had to deal with the Global Financial Crisis, but it also had to manage the debt crisis, that affected many eurozone countries like Portugal, Ireland, Greece and Spain. Consequently, its economic recovery was very slow. After contracting by 4.5% in 2009, the eurozone area again contracted in 2012 and 2013 by 0.9% and 0.2% respectively. Subsequently, growth was slightly above a percentage point, but less than 2%. In 2017, growth in the EU is expected to increase to 2.3%, higher than the 2% in 2016. Although growth is strengthening, the Brexit negotiations will have an impact on future growth for both the EU and the United Kingdom.
Fast Growing Emerging Markets Leading
China and India are among the biggest economies among the developing countries and they have been both the main engine for the world economy in 2017. The economic growth in China has steadily declined from 10.6% in 2010 to 6.7% in 2016. Since China was preparing for the 19th National Congress of the Communist Party of China, the Chinese leaders and the various policymakers were making sure that the Chinese economy was steadily growing and meeting their objectives. In 2017, the economy is estimated to increase slightly to 6.8%.
As for India, some of the economic policies, adopted by the Prime Minister Narendra Modi and his government, have affected the high growth rate of India, when it grew at 8% and 7.1% in 2015 and 2016 respectively. The demonetisation of the INR1000 and INR500 banknotes last November to fight against the shadow economy has created confusion and chaos within the Indian economy, that is mainly cash based.
Moreover, the implementation of the goods and services tax (GST) in July this year to reform the whole taxation policies in India has also affected the economy. Although these economic reforms will be beneficial in the future, in the short term, they have caused a decline in economic growth. In 2017, growth in India is estimated to be at 6.7%, a slight drop from 2016.
Top 20 fastest growing economies in 2017
Besides China and India, the other countries among the top 20 fastest growing economies in the world in 2017 are mainly small economies. However, these 20 countries are mainly from two continents - Asia and Africa. Within this group, nine fast developing countries are from Africa, while 11 others are from Asia.
At a regional level, five of the fastest growing countries are from the Association of South East Asian Nations (ASEAN) - Myanmar (growing at 7.2% in 2017), Cambodia (6.9%), Laos (6.9%), Philippines (6.6%) and Vietnam (6.3%), while West Africa has four countries - Côte d'Ivoire (7.6%), Senegal (6.8%), Guinea (6.7%) and Burkina Faso (6.4%).
Despite all the political and economic uncertainties in the world, these countries have managed to grow at a very fast pace. For the coming years, many of these countries will continue on this high growth path.
" Besides China and India, the other countries among the top 20 fastest growing economies in the world in 2017 are mainly small economies. "
Latin America Fragile Recovery
Like all natural resource dependent economies, many Latin American countries have been badly affected by the drop in prices of commodities like oil, copper and iron ore. Due to the drop in oil and iron ore prices as well as the many political scandals, Brazil, the biggest Latin American economy, went through very difficult times and suffered two years of economic contraction. The Brazilian economy contracted by 3.8% and 3.6% in 2015 and 2016 respectively.
While Brazil is still facing many political and economic uncertainties, the recovery in commodity prices has helped the economy to churn a slight growth of 0.7% in 2017. Argentina also experienced political uncertainties, that dragged its economy into recession in 2016. For 2017, its economic outlook seems to be brighter and Argentina is estimated to grow at 2.5%. As for Venezuela, its economy is facing turmoil under Nicolás Maduro and his government. The Venezuelan economy has been contracting since 2014 and is expected to contact by 12% in 2017.
Mexico has been growing steadily over the last few years. However, it may be experiencing some headwinds with the Trump administration reviewing the North American Free Trade Agreement (NAFTA) as well as adopting some protectionist policies. For 2017, growth in Mexico is expected to decline slightly to 2.1%, from 2.3% in 2016.
" 2017 does not seem to be as dire as the previous years. "
Chile and Peru are major copper exporting countries. With the drastic drop in copper prices since 2014, both Chile and Peru have experienced slight economic slowdown. However, with the copper prices increasing in 2017, both countries will grow slightly at a higher rate. Chile and Peru are expected to grow at 2.5% and 3.8% in 2017, up from 1.4% and 2.7% in 2016 respectively.
2017 does not seem to be as dire as the previous years. At the beginning of the year, the many geopolitical risks seemed to cast a dark shadow over the global economy. In the end, the economic outlook turns out to be better than expected with growth being firmer in most regions.
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