Prospects for the global economy in 2018

Subject

PROSPECTS 2018: Global economy

Significance

Global GDP growth is likely to edge higher in 2018 as trade, investment and employment expand. However, monetary policy is gradually tightening, fiscal expansion is limited and there is little chance of a repeat of the surprise boost from trade seen in 2017 or a recovery in productivity. Inflation may remain obdurately low in the United States, Japan and the euro-area but not sufficiently to deter the US Federal Reserve (Fed) and the ECB from gently reeling in their bond-buying programmes. Modestly higher commodity prices should support economic recovery in resource producers.

Impacts

• The timing of elections in the United States, Canada and Mexico may prolong the NAFTA trade talks into 2019 or beyond.
• China will battle any US attempts to constrain its innovation and access to technology, which it sees as key to its rebalancing.
• Technological progress and more open markets exacerbate the unpredictability of jobs and wages, but policy will increasingly address this.
• Automation means the job intensive low-cost industrial growth engine is now less effective; developing countries must consider new models.
• A better balance of power between multinationals, international organisations and governments will be key to global tax cooperation.