While global gross domestic product (GDP) growth accelerated to its highest level in two years in the first half of 2017, some of the world’s economic engines are out of sync, according Euler Hermes, the world’s leading trade credit insurer.
In its latest Economic Insight report, titled “A breeze of growth”, the company’s economic research department found good overall global growth momentum against a backdrop of a disappointing U.S. picture, a reassuring European outlook and stabilizing emerging markets. Global GDP growth forecasts remain +2.9 percent for 2017 and for 2018 as the 7th consecutive year below 3 percent. Upward revisions have been made for the eurozone (+0.2 percentage points to +1.9 percent), China (+0.4 pp to 6.7 percent) and Japan (+0.1 pp to 1.3 percent). These are counterbalanced by downside revisions for the U.S. (-0.1 pp to 2.2 percent), Latin America (-0.2 pp to +1.2 percent), the Middle East (-0.2 pp to +2.1 percent) and South Africa (-0.4 pp to +0.6 percent).
“Global GDP growth is accelerating with good, rather than great, momentum finally building at its fastest pace in two years. However, behind this positive picture lies a marked divergence in economic fortunes from country to country,” said Ludovic Subran, chief economist at Euler Hermes.
“While GDP growth has been lackluster in the U.S., it’s been conversely strong in China thanks to previous stimuli, and firm in the Eurozone mainly due to export growth. Business confidence has also significantly improved as companies are finally feeling the boost from stronger demand and improved pricing power, after several years of sluggish growth. Strong business confidence also heralds continued growth in investment and progressively improving labor markets. This combination should spur private spending looking forward,” added Subran.
Euler Hermes identified five key drivers behind the acceleration of global growth as well as five threats to growth quality.