India leads global economy upswing: Scotiabank

The global economy is projected to post its best performance this year since 2014, at 2.3%, reveals Scotiabank’s global outlook report. India is expected to lead the pack with growth of 7.5%, followed by China (6.4%) and Indonesia (5.3%). The GDP of the U.S. is expected to be 2.3%; Canada’s GDP, 2.0%.

Read: What investors should expect for 2017: report

While geopolitical risks abound, recent economic data point to strengthening growth prospects in most areas of the world. From an economic perspective, the risks could be characterized as unbalanced toward the positive for the first time in many years, given the momentum already underpinning global growth.

But don’t get out the rose-coloured glasses just yet. Those geopolitical risks are potentially substantial.

“The incoming Trump administration’s approach to trade policy, which has not yet been fully articulated, represents a significant risk to the global recovery,” says Jean-François Perrault, senior vice-president and chief economist at Scotiabank, in a release.

Here are highlights of Scotiabank’s outlook by country.

• Canada: Growth is expected to accelerate over the next two years owing to firmer domestic activity, expanding fiscal stimulus and increasing foreign demand. Housing and auto sales are expected to provide a mild drag on growth.

Read: Invested in Canada? Monitor these 3 trends

• United States: U.S. growth will be driven by robust labour markets, more confident consumers and a pickup in business investment.
• Latin America: The area will see generally stronger growth in 2017, though capital flow volatility will remain a challenge.
• Capital markets: The U.S. Treasury and Government of Canada yield curves are expected to flatten over the forecast horizon. The Fed is likely to hike rates three times in 2017 and twice more in 2018, while the Bank of Canada is not expected to raise rates until mid-2018.
• Currency: U.S. dollar strength is expected to persist well into 2017. While it remains too early to know exactly what the incoming Trump administration intends to do — and when it will be able to practically implement policies — the expectation is that the administration’s initiatives may provide additional support to the U.S. dollar.
• United Kingdom: The U.K. economy continues to expand at a trend pace, but is likely to slow progressively throughout 2017.

Read: ECB expected to continue stimulus program

• Europe: Eurozone growth is re-accelerating and stronger-than-expected external demand could create an upside surprise. Inflation will temporarily move closer to 2.0% year-over-year in Q1, while core inflation is forecast to gradually rise.
• Asia: India leads in growth, as China’s economic transition continues. Japanese growth will remain low, at 0.7%.

Read the full report.

Staff

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