Atradius: Global Upswing to Continue in 2018
Global economic momentum, which began picking up in the second half of 2016, has solidified throughout 2017. So says a recent economic outlook report from Atradius, the global trade credit insurer.
Atradius expects higher growth rates in emerging markets and advanced economies to drive world GDP growth to 2.9 percent this year, compared to a lackluster 2.5 percent increase in 2016. Higher inflation, falling unemployment, and strengthening purchasing managers’ indices (PMIs) all point to a continuation of robust economic growth in advanced markets.
In emerging markets, economic recovery is gaining strength on the back of stronger global trade, a modest recovery in commodity prices, still benign external financing conditions, and supportive domestic policies in some major markets. This, according to Atradius, should lead to another year of 3.1 percent global economic growth.
After a meager 1.3 percent expansion in 2016, growth in world trade volume accelerated to 3.8 percent based on a 12-month year-over-year rolling average, as of September 2017. This stronger-than-expected expansion is being driven by intra-regional trade flows in Asia and strong import demand from North America. Despite political uncertainty, indicators suggest continued strong growth.
The Baltic Dry Index, a benchmark for demand for shipping raw materials, has increased to its highest level since 2014. New export orders have also held up, suggesting that exports will continue to grow, although at a slower pace. This has led to an upward revision of trade forecasts: five percent growth in 2017 and a more steady but still strong 3.5 percent increase in 2018.
Oil prices have been increasing in the second half of 2017, and since late October have breached the $60 per barrel ceiling for the first time since July 2015. Inventories have declined faster than expected due to surprisingly strong global oil demand growth, and the extension of OPEC’s production cut deal until the end of 2018.
US shale production has proven resilient and is expected to continue to keep prices moderate in 2018. The US Energy Information Administration has revised its oil price forecasts up to $53 per barrel on average in 2017 and $56 in 2018.
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