Stefan’s weekly: What Economic Outlook can we expect form the World Economic Forum?

The World Economic Forum attracts political and economic leaders year after year. It is an interesting hub for official and unofficial talks between global political and economic leaders. Since many of the most influential politicians and influential economic players are present, analysts and researchers are trying to feel their pulse and trying to come up with estimates for 2018 and beyond. Looking at the media coverage and the official WEF website, I have tried to consolidate what I think could be a (not meant to be complete) 2018 economic consensus outlook pre-President Trump today’s speech.

The good news is that the global economy is solid, and the risk of a recession remains low, with global growth momentum still strengthening. Due to structural technological and globalization factors inflation is likely to remain under control. Crashing the global economy would require a large shock and while the list of such potential shocks is long, the probability of any of them doing serious damage is low.

However, growing debt burdens could become a risk for many economies and still and in contrast to the U.S. Central Bank, the ECB and BOE are unlikely to raise interest rates until 2019, the BOJ may wait even longer.

Europe’s expansion is expected to remain solid and thanks to the relatively subdued outlook for oil prices the upside for inflation seems limited, which ought to help real income growth. Labour markets should also continue to improve and the still relatively competitive euro as well as an underlying strong global growth should help exports. On the other hand, political uncertainty in the Eurozone and the UK could undermine growth.

The US economy is also likely to sustain above-trend growth. Economic growth is expected to increase to 2.6% up from 2.3% in 2017 and 1.5% in 2016. Financial conditions remain supportive and household balance sheets are improving, the US dollar is well off its peak and capacity utilization rates are high. Normally these are strong tailwinds for consumer spending, capital expenditures, and housing. The tax cuts and jobs act are expected to raise growth by another 0.3 % and push down unemployment, however eventually leading to higher interest rates and a higher USD.

While China’s economy is expected to slow down slightly due to its excess industrial capacity, debt overhang, and a housing oversupply, emerging markets should improve gradually. Unsurprisingly a large difference between individual countries within the Emerging Markets cohort needs to be expected.

All in all a positive consensus for once

And as always, Ladies and Gentlemen, if you want to share any of your thoughts with me, please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend!

Yours truly,

Stefan M. Kremeth