Economic pundits forecast 2.9 pct global economic growth in 2017

NEW YORK: Economists at the New York-based Conference Board, a global, independent business membership and research association, forecast that the current cyclical upswing and recovery in productivity will raise global growth to 2.9 per cent in 2017, up from 2.5 per cent last year.

In its latest Global Economic Outlook report released recently, the Conference Board, which won the US Consensus Economics 2016 Forecast Accuracy Award, said that the Leading Economic Index for the global economy showed a widespread strengthening of leading indicators around the world, especially in emerging markets and, particularly, in India and China.

While most of 2015 and 2016 showed a weakening in business cycle dynamics with the recession risk far greater during the late 2015 and early 2016, it said the recent turnaround reflected a confluence of positive forces.

“Strong consumer and business confidence, strengthening stock markets, a turnaround in the global industrial cycle, and a recent rise in the rate of global trade all point to strengthening cycle dynamics,” explained Bart van Ark, chief economist at the Conference Board.

But van Ark also warned that recovery supported by a pro-cyclical improvement in productivity, could die out if businesses did not accelerate investment.

He pointed out that mediumterm challenges manifested in the slowing labour supply and the sluggish pace at which new technologies were translating themselves into a higher growth potential for the global economy.

The latest estimates of monthly leading economic indicators and quarterly gross domestic product (GDP) growth indicated that rising confidence among business and consumers in recent quarters was finally translating into some positive impact on the “real economy”, van Ark noted.

He envisaged the mature economies, mainly in the west and Japan, would show a “small improvement” rising from 2.0 per cent in 2016 to 2.1 per cent in 2017, but cautioned that the cyclical dynamics which had helped the Euro Area outlook, had weakened in the UK even before last year's disruptive Brexit vote.

The UK growth is projected at 1.5 per cent for 2017 but the present economic uncertainty and Brexit strategy point to increasing risks in that outlook.

Among emerging economies, of special interest was the economic performance of India and China, with India's economy rebounding well after the demonetisation in late 2016 while China beat expectations with a fairly strong first quarter, benefiting from the strengthening of the global industrial cycle.

However, future growth for China remained at risk as fiscal and monetary policy becomes less supportive, which in turn may contribute to a slowing environment for business investment and real estate,” van Ark observed.

The Conference Board lowered its projections for the Middle East and Turkey which face increased political uncertainties, enhancing the vulnerability of some of the region's major economies, including Saudi Arabia and Egypt.

The Conference Board's economists also touched on major issues of global interest.