Toronto, ON (Jan. 20, 2017) – The global economy is projected to post its best performance this year since 2014. 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.
Geopolitical risks are 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,” said Jean-Fran�ois Perrault, Senior Vice President and Chief Economist at Scotiabank. “While it may appear that we are entering a stronger, more sustained phase of the global recovery, it is too early to put on our sunglasses.”
Highlights of Scotiabank’s Global Outlook include:
- 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.
- United States: U.S. growth is expected to accelerate to 2.3% in 2017 and 2.4% in 2018, driven by robust labour markets, more confident consumers and a pick-up in business investment.
- Latin America: 2017 will see generally stronger growth, though capital flow volatility will remain a challenge.
- Capital Markets: Scotiabank Economics forecasts the U.S. Treasury and Government of Canada yield curves 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: US 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 USD.
- United Kingdom: The U.K. economy continues to expand at a trend pace, but is likely to slow progressively throughout 2017.
- 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% y/y in Q1, while core inflation is forecast to gradually rise.
- Asia: China’s economic transition continues, with output growth expected to be close to 6.5% in 2017. India will be the fastest growing major economy, with anticipated growth of 7.5% in 2017. Japanese growth will remain low, at 0.7%.
For more details, read Scotiabank’s Global Outlook online.
Scotiabank provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.
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