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Global Economic Outlook, September

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Global Economic Outlook, September Unedited United Nations Department of Economic and Social Affairs LINK Global Economic Outlook 2018-2020 Presented at the DESA Expert Group Meeting on the World Economy (Project LINK) Co-sponsored and hosted by ECLAC, Santiago, Chile 5-7 September 2018 1 Acknowledgements This report presents the short-term prospects for the global economy in 2018-2020, including major risks and policy challenges. The report draws on the analysis of staff in the Global Economic Monitoring Branch (GEMB) of the Economic Analysis and Development Division (EAPD), United Nations Department of Economic and Social Affairs (DESA), and on inputs provided by the experts of Project LINK. The current report was coordinated by GEMB, with contributions from Helena Afonso, Grigor Agabekian, Dawn Holland, Matthias Kempf, Poh Lynn Ng, Ingo Pitterle, Michal Podolski, Sebastian Vergara and Yasuhisa Yamamoto. Pingfan Hong provided general guidance. This report is prepared for the UN DESA Expert Group Meeting on the World Economy (Project LINK) to be held on 5-7 September 2018 at ECLAC Headquarters in Santiago. The views expressed herein do not necessarily represent those of the United Nations or its Member States. 2 Contents Section 1: Prospects for the world economy .............................................................................. 5 Global overview ..................................................................................................................... 5 Macroeconomic policy stance .............................................................................................. 19 Risks to the outlook .............................................................................................................. 21 Section II: Key policy challenges ............................................................................................ 24 Unilateral trade measures challenge the multilateral trading system ................................... 24 High inequality constrains inclusive growth ........................................................................ 25 Pricing in climate change ..................................................................................................... 30 Section 3. Regional economic prospects ................................................................................. 32 Developed economies .......................................................................................................... 32 North America: United States imports stagnate amid rising trade tensions ................ 32 Canada...................................................................................................................... 33 Developed Asia and Pacific ......................................................................................... 34 Australia ................................................................................................................... 34 Japan ........................................................................................................................ 35 Europe: Solid growth with significant downside risks ................................................ 35 Austria ...................................................................................................................... 36 Bulgaria .................................................................................................................... 37 Croatia ...................................................................................................................... 37 Denmark ................................................................................................................... 38 Germany ................................................................................................................... 38 Italy .......................................................................................................................... 39 Romania ................................................................................................................... 40 Slovak Republic ....................................................................................................... 40 Slovenia.................................................................................................................... 41 Spain ........................................................................................................................ 41 Economies in transition ........................................................................................................ 42 The Commonwealth of Independent States and Georgia ............................................ 42 Russian Federation ................................................................................................... 44 Ukraine ..................................................................................................................... 45 South-Eastern Europe .................................................................................................. 46 3 Developing economies ......................................................................................................... 46 Africa ........................................................................................................................... 46 Angola ...................................................................................................................... 48 Ghana ....................................................................................................................... 49 Nigeria...................................................................................................................... 49 South Africa ............................................................................................................. 50 East Asia ...................................................................................................................... 50 Hong Kong ............................................................................................................... 51 The Philippines ........................................................................................................ 52 Republic of Korea .................................................................................................... 52 Taiwan Province of China ....................................................................................... 53 South Asia .................................................................................................................... 54 India ......................................................................................................................... 55 Nepal ........................................................................................................................ 56 Pakistan .................................................................................................................... 56 Western Asia ................................................................................................................ 57 Turkey ...................................................................................................................... 57 Latin America and the Caribbean ................................................................................ 58 Brazil ........................................................................................................................ 59 Costa Rica ................................................................................................................ 60 Mexico (1) ................................................................................................................ 61 Mexico (2) ................................................................................................................ 61 Appendix A. Statistics tables ................................................................................................... 62 4 Section 1: Prospects for the world economy Global overview Short-term prospects for the global economy remain steady, but risks continue to build The global economy strengthened over the course of 2017, and the baseline forecast presented in this report points to steady, stable global growth of at least 3 per cent per annum for the next few years (figure 1.1). Growth rates in many developed economies have risen above their long- run potential, with limited upward impact on inflationary pressures to date. While these headline figures for the world economy remain largely favourable, risks to the economic outlook have continued to build. Global trade tensions continue to rise, and world trade growth has started to moderate, with risks of a more widespread slowdown. Uncertainty regarding monetary policy adjustment by major central banks, and the associated tightening of global financial conditions, constitutes a downside risk to investment prospects. In a number of countries, the undercurrent of geopolitical tensions has the potential to severely disrupt economic activity. The transmission channels for these risks include increased volatility in financial markets, notably equity prices, interest rates, exchange rates and commodity prices, compounded by the potential for wider spillover and contagion effects. Many countries exhibit significant vulnerabilities that leave them exposed to such financial market disruptions. This derives from high and rising levels of debt, especially debt denominated in foreign currency; large macroeconomic imbalances; and excessive dependency on
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