World economies growing in synch

World economies growing in synch | Corporate Risk & Insurance

World economies growing in synch

“The outlook is the most upbeat in a decade.”

That’s good news from the Economist Intelligence Unit (EIU) about the finance industry, which is good news for risk managers in any sector. Scars left by the financial crisis will finally begin to feel fully healed this year, as firms settle into a steady state, according their new report, “Industries in 2018.”

“Global economic growth will strengthen, interest rates will return to normal, financial firms will again pursue international opportunities, and regulators will take a break from applying ever stricter standards,” says Ana Nichols, managing editor, industry briefing, The Economist Intelligence Unit. “The big picture is that we’re in a global sweet spot.”

Key findings on the state of the world economy from the report include:

  • Major economies are all growing at the same time – a rare synchronized upswing

  • Both developed and emerging markets will benefit as trade with developed countries and global commodity prices climb, fueling market growth in Russia, Brazil, and the Middle East

  • The most important news is that the EIU raised China’s growth forecast for 2018 from 5.8% in GDP real growth to 6.4%. That means continued growth in all the countries that rely on Chinese trade demand, too

  • While regulators will monitor new financial instruments like crowdsourcing more closely, regulation is expected to be relatively stable in 2018

All major economies keep growing at the same time – at rates of about 2.9%

(Real global GDP growth, %)

Source: Economist Intelligence Unit

Despite the optimism, Nichols cautions there are some sizeable political and economic risks that could throw a wrench in the predictions, including:

  • Political and long-term policy uncertainty in the US under President Trump

  • Uncertainty related to Brexit negotiations, especially as business units and workforces shift to other EU locations ahead of Brexit

  • The US Federal Reserve will raise interest rates three times in 2018 and four in 2019, which runs the risk of being too much, too fast

  • Despite an increased growth forecast for China, it’s still managing a massive, but stable debt pile

  • North Korea remains a black swan at a time when the US relinquishes its leadership abroad

Ultimately, risk managers will need to adapt to deal with any potential risks, while capitalising on the opportunities presented by current global growth.


Related stories:
Environment, Technology key takeaways for risk managers at Davos