2017, which the upcoming year of the Rooster seems will not make a big improvement from sluggish global economy in 2016. With plenty of risks ahead including geopolitical and economic instability , here the five challenges facing the world economy in 2017.
1. A protectionist president
In its latest “World Economic Outlook,” the IMF’s chief economist Maurice Obstfeld warned that “turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”
The IMF’s managing director, Christine Lagarde, has described policies that restrict trade as a form of “economic malpractice” that could choke growth, jobs and wages, and further weaken the global outlook.
2. Brexit and European instability
National elections which set for France, Germany and the Netherlands in 2017, consider each of which feature a far right candidate, there is a potential for economically damaging protectionist policies in the Eurozone
While Britain’s influence in the global economy has diminished in recent decades, the impact of the June Brexit vote was felt in markets and currencies across the globe. The fact that markets are still rattled was shown recently by the British pound’s fall to 186-year-lows in the wake of British Prime Minister Theresa May’s announcement that Brexit would commence by next March.
The longer the saga continues, the longer the associated uncertainty will be priced into equities and currencies, dampening corporate investment and damaging the European economy as a whole
3. Monetary policy reaches its limits
Eight years of quantitative easing (QE) since the global financial crisis have increased the balance sheets of the world’s four largest central banks from $6 trillion to $18 trillion, most of which consists of their own government’s bonds. While QE has succeeded in maintaining short-term liquidity in markets, its diminishing returns mean the end is nigh, with speculation already mounting that the European Central Bank (ECB) and Bank of England (BOE) may be prepared to tighten monetary policy.
4. Tighter fiscal policy weighs
A recent survey of money managers by the Bank of America Merrill Lynch found that 48 percent believe that global fiscal policy remains too tight, a sentiment echoed by many other economic commentators worried over the increasing ineffectiveness of monetary policy.
Yet while the West tightens, it will hope China continues its fiscal policy splurge, fueled by a desire to keep economic growth at politically acceptable levels ahead of the 19th National Congress next year.
5. Commodities recovery reverses
Softer commodity prices have disproportionately hurt emerging economies, which in recent years have made a disproportionate contribution to global economic growth. While emerging Asia and particularly India have appeared largely resilient, the IMF fears that sub-Saharan Africa, South America, the CIS region and the Middle East will not fare so well, particularly if OPEC fails to reach an agreement on oil production cuts.
2017 will be yet another challenging year for the world economy. World leaders will face a tough time keeping the global recovery on track next year, even while wars, terrorism and other threats add to the challenges.
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©idsMED 2017
