Friday, 20 Apr 2018
Business

IIF: Global economy will expand 3.5% in 2018, but trade is a key risk

NY . The world economy will grow in 2018 at a rate higher than anticipated, mainly due to the reduction of taxes in the United States, but commercial tensions threaten to hurt months of synchronized global expansion, the Institute of International Finance said Monday.

The IIF (by its abbreviation in English), a global association that groups to companies of the financial sector, raised its forecast of global growth for this year in 0,2 percentage points to 3,5%, after elevating its projection of the expansion economic growth in 2018 to 2.9%.

The US economy grew 2.3% last year, according to IIF, which had expected an expansion of 2.4% for the United States in 2018 before an approved tax cut came into effect at the end of last year.

“We have the United States, where there is a significant fiscal stimulus due to fiscal reform, and this will boost consumption and investment,” said Sergi Lanau, deputy chief economist of the IIF. According to the report, a greater growth of the United States is “the key engine of the upward revision”.

Among the main emerging economies, the report highlighted the continued growth of Brazil after a deep recession in 2015-2016, with a large fiscal deficit as the main risk.

However, the synchronized growth recorded by the world economy in 2017 for the first time in a decade is beginning to show fissures, with exporters pressured by global commercial uncertainty.

The IIF considered the jump in inflation -especially that of the United States, which is very much guided by the price of crude oil- as a risk to global growth.

But Lanau said he believes that “in the second half of the year, oil prices will moderate, especially because when prices rise, US shale producers increase production.”

Among the main emerging economies, the report highlighted Brazil’s continued growth after a deep recession in 2015-2016, with a large fiscal deficit as the main risk for its growth projection of 2.7% for this year.

China would grow at a slightly lower rate to 6.7%, compared to 6.9% in 2017, while India will probably accelerate its expansion to 7.9% from 6.4% last year.

IIF also issued its first global growth estimate for 2019 at a stable 3.4%.

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