Global Economic Outlook 1st Quarter 2017

As 2017 begins, the global economic environment is characterized by new political realities.

In the United States, there is a new president with ideas and goals different from those of his predecessor.

The US election has led to higher bond yields and a higher-valued US dollar based on expectations of faster growth and more inflation.

In Europe, growth and inflation have begun to accelerate, yet unemployment remains stubbornly high in much of the continent.

Meanwhile, important elections are on the horizon for both Germany and France, setting the stage for the policy environment in the coming year.

In Asia, growth is stabilizing, but risks are piling up in the form of higher debts and rising trade tensions.

United States: An economy in transition
The new US president is championing a wide range of policy proposals. However, since it is not known what the Trump administration will be able to achieve with Congress as to the specific form and timing of these policy objectives, there is substantial uncertainty in the near to mid-term.

Eurozone: Political risks will test a resilient recovery
While 2016 was a bumpy year politically for the Eurozone due to events such as Brexit and the Italian government’s referendum defeat, surprisingly, the Eurozone economy has shown remarkable resilience overall and has continued its recovery into its fourth year.

China: New US policies could hurt exports
In 2016, China’s exports suffered the steepest decline since the global financial crisis of 2009, and things still look grim, given concerns that the new US administration will implement protectionist policies.

Japan: Continued weakness in yen may boost growth
The Japanese economy performed better than expected in recent months. While the weakness in the yen should boost growth, consumer spending could remain weak, given low wage gains. Thus economic growth is likely to remain modest in the coming year.

India: The pains and gains of demonetization
As demonetization hits India, affecting consumer demand and various industries, the question everyone is asking is how deep and long will this ripple be. In the long run, India may benefit immensely from the increased digitalization of the economy and expansion of the formal banking sector.

Mexico: Embracing trade as a source of economic growth
Over the last 20 years, Mexico has completely embraced free trade, having signed various trade agreements around the world. Now that its GDP is heavily dependent on exports, it is not surprising that the nation is concerned over Donald Trump’s campaign promise to renegotiate NAFTA.

Turkey: Trudging on in troubled times
Turkey has often used the advantage of its strategic location to build its economic stature. However, things did not go well for the country last year: strife at its borders, a failed coup, and terrorist attacks. But is the future really that bad for the Turkish economy?

South Africa: In a tight spot
South Africa’s economy continues to be stifled by weak growth and the need for fiscal consolidation. The threat of a sovereign credit rating downgrade still hangs in the air, though tempered by the government’s avowed commitment to fiscal consolidation.

Shipping: Sailing into troubled waters
Since the Great Recession, the global shipping industry has been facing strong headwinds, which are not likely to go away soon, given uncertainty in trade policy and changing trade patterns among nations. Interestingly, the tanker business has been doing better than its counterparts.