Global economy on the mend but concerns remain

There is good reason to cheer for the world economy, at least for the moment. After all, it took nearly a decade for many countries to turn the corner and achieve levels of growth prior to 2008, or before the downturn. Since its last report in June, the World Bank has upgraded forecasts. The world economy is expected to grow at 3.1 per cent in 2018, while the numbers have been revised to 3 per cent for last year. It is a notable recovery from a post-crisis low of 2.4 per cent. There’s optimism in these numbers. Regionally, however, it’s been a rough ride. Saudi Arabia’s economy fell to 0.3 per cent in 2017 from 1.7 per cent the year before and the UAE eased at 1.4 per cent. Low price of oil, regional conflicts and cuts in production were largely to blame for this lacklustre show. The outlook, nevertheless, looks bright. That is, if no new regional conflicts emanate and rock the boat. GCC economies, overall, are likely to lead the charge in the region as governments take reforms forward. Plans by Saudi Arabia and the UAE are expected to bolster their economies. The fiscal adjustments, investments in infrastructure, and reforms to promote non-oil sector activity will allow these economies to expand at a greater pace. Dubai alone is investing significantly in infrastructure in the run up to Expo 2020, which will propel growth in key sectors.

Overall, GCC growth is forecast to pick up to 2 per cent this year from 0.7 per cent in 2017, which is indeed encouraging. Oil at an average of $58 a barrel in 2018 won’t be much of a concern as economies here are becoming less reliant on it. Global geopolitical shocks are the bigger worry. On the economic front, too, some mediumto long-term concerns loom. The global growth levels appear to have peaked and going forward lack of investments, ageing populations and tighter monetary policies by advanced economies will place limits on expansion. A slowdown is likely to affect the region as it has in the past. But more importantly, governments here need to contain or withstand regional conflicts and surprises to continue their growth trajectory.