Global economy expected to accelerate slightly in 2017

Real GDP expanded by only 2.5% in 2016, and only a slight uptick to 2.8% is expected for 2017, reveals a report by the Conference Board of Canada.

Read: Don’t be too bullish on 2017 growth

Overall, expect uncertainty to provide headwinds to economic growth, suggests the report, citing the Trump administration and its potential trade policies, Brexit, populism and China’s structural adjustments.

Read: How to capitalize on market fear

Other highlights:

World oil prices are expected to remain low, at less than US$60 a barrel.
The U.S. economy will expand 2.3% over the near term. U.S. household spending is expected to remain solid, and investment spending should strengthen over the near term, thanks in part to a rebound in world oil prices.
The Mexican economy could be seriously damaged if the U.S. imposes import tariffs, but the country’s reform agenda could be successful in offsetting some of the damage. GDP growth in Mexico is expected be in the 2.5% range over the near term.

Asia-Pacific

A potential offset to the negative effect of Trump’s potential policies is the U.S. dollar, which has surged in value against Asian currencies due to rising U.S. interest rates. This should make Asian exports more competitive in the key U.S. market.
China’s economy is on track to expand at 6.5% in 2017, as stronger housing activity and a rebound in global demand for high-technology products support the economic upturn. However, rising debt levels at some banks and state-owned enterprises, and overcapacity in industries such as steel and coal, pose economic risks.

Read: China’s growth sank to three-decade low in 2016

The Bank of Japan’s ongoing efforts to reflate the Japanese economy remain stuck in neutral, with real GDP growth expected to expand by just 1.1% in 2017.
Overall, the Asia-Pacific region is expected to grow in the 4.5% to 5.0% range over the near term.

Europe

Economic growth in the European Union is expected to decline slightly this year, increasing just 1.5% in 2017.
Germany, the region’s largest economy, is forecast to expand 1.3%, down from 1.8% last year. The anticipated slump in growth in a key trading partner — the U.K. — is one of the factors behind Germany’s weak outlook.
The potential for a “hard Brexit” in which the British are left without tariff-free access to the large EU market remains the largest concern.
If a trade war erupts between the U.S. and China, European markets will suffer.

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