Annual Report 2016

The world economy

At the beginning of 2017, the world economy is continuing along a path of steady, if very moderate, growth. We expect growth to accelerate slightly as the year progresses. For the full year, the advanced economies are likely to achieve growth rates similar to those of 2016. The emerging markets, however, should experience a slight revival after several years of economic weakness.

Various indicators suggest that the US economy should expand faster again after rather weak growth in 2016, although interest and inflation rates are likely to rise slightly. While private consumption will continue to profit from the favorable labor market and rising incomes, the expected acceleration will be mainly driven by investment. Another important question for the year 2017 will be which expansive fiscal policies are implemented by the new administration. Although those policies are unlikely to have their full effects before 2018, a certain boost to the economy could also occur this year, depending on the magnitude of stimulating measures. Overall, most analysts currently anticipate growth in gross domestic product (GDP) of 2 to 2.5 %.

Growth prospects for the Japanese economy remain rather moderate. Although domestic demand could develop rather more dynamically than in 2016, current GDP growth forecasts are only of the magnitude of 1 %.

The economy of the European Monetary Union (EMU) has proven to be quite resilient in the past two years, and should continue its upward trend in 2017, although at a moderate growth rate. But due to the possible negative effects of the British referendum on leaving the European Union (EU), we expect economic growth to be somewhat slower than last year. The European Central Bank is likely to maintain its expansive monetary policy during 2017. There should also be a little positive economic stimulus from the fiscal side. At present, we anticipate GDP growth in the EMU of approximately 1.5 %. Current forecasts for growth in Germany are of the same magnitude. Although the negotiations on the UK’s exit from the EU expected for the coming months are likely to have a negative impact, no severe slump is currently anticipated for the British economy.

The emerging economies could achieve aggregate growth in output of just over 4 % in 2017, which would bring them back to their long-term trend. This improvement is primarily the result of the expected development on the South American continent and also in Russia. In both regions, a return to slight growth is now generally anticipated after the recessions there, some of which were quite severe. A key factor behind this improvement is the ongoing, although only gradual, stabilization of raw-material prices expected in 2017. However, oil prices in particular will probably remain too low to provide sustained economic stimulus in the countries of the Middle East. In view of the volume it has now reached, GDP growth in China is likely to continue slowing down in the coming years. But we assume that the political decision makers will take countermeasures and carry out fine tuning in good time, thus succeeding in avoiding a “hard landing” also this year, and we anticipate growth of just under 6.5 %.

Overall, there are some indications that the world economy will perform somewhat better in 2017 than the weak growth of the previous year, but will probably not exceed the rather below-average growth corridor of 2.5 to 3 %.

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