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June 29, 2017

Global Economy: On a modest growth path

  • While the revised US growth number indicated modest recovery for the first quarter (Q1) of 2017, the Fed hiked the policy rate by 25 basis points (bps) in its June meeting
  • Unemployment continued to decline in the Euro area in April, with a 9.3%unemployment rate, the lowest since March 2009
  • Rising residential rent and healthcare prices in China bumped up April inflation
  • Energy commodity prices dipped in May as the US and Libya increase crude oil production
  • Though challenged by a plethora of uncertainty-inducing variables, the global economy is hanging on. While growth mellowed in the US and UK, it remained stable in the euro area and was better than expected in China.

In its Global Economic Prospects report (June 2017), the World Bank forecast global economic growth will strengthen to 2.7% in 2017, up from 2.4% in 2016, with the emerging-market and developing economies playing a key role. The bank expects the pickup in manufacturing and trade, rising market confidence, and stabilising commodity prices to buoy these economies. Despite the reassuring presence of positives, some uncomfortable downside risks remain. These include the possibility of greater trade restrictions and an inward shift in policies, uncertainty over fiscal and monetary policies, and long-term structural problems such as low productivity and investment growth and high-income inequality.