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Global Growth: A Modest Pickup

Citi analysts expect a pickup in global real GDP growth from 2.5% in 2016 to 2.7% in 2017, as fiscal policy turns increasingly expansionary in the developed markets. Indeed, fiscal policy in the developed markets became expansionary in 2016 for the first time since 2010. Following the US election, a fiscal stimulus, involving personal income and corporate income tax cuts and an increase in infrastructure spending, is highly likely, even if its exact size, nature and timing remain uncertain.

Citi analysts believe that most of the stimulus is likely to materialise in 2018 and that the fiscal impulse would roughly amount to 1.5% of GDP in 2018-2020 in the US.

The forecasted rise in global growth in 2017 is also partly driven by a pickup in emerging markets(EM) growth. EM is expected to grow 4.3% in 2017, up from 3.8% in 2016. This is largely due to fading recessions in a small number of large EM economies such as Argentina, Brazil, Nigeria and Russia. Stabilisation in Chinese growth and steady commodity prices also support an end to the multi-year EM slowdown.

Key takeaways

  • Citi analysts expect a pickup in global real GDP growth to 2.7% in 2017
  • Higher Inflation and bond yields are likely to accompany stronger global growth
  • Stronger growth is likely to boost company earnings and create opportunities in selected regional equity markets and sectors

 

 

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