GLOBAL ECONOMIC MONITOR (MAY, 2018)

Short-term prospects for the world economy have continued to improve. The recent improvement reflects a further uptick in the growth outlook for developed economies in 2018, on the strength of accelerating wage growth, broadly favorable investment conditions and the short-term impact of a fiscal stimulus package in the United States. Higher levels of energy and metal prices are also supporting a gradual recovery in many commodity-exporting countries.  On the trade front, world trade growth has accelerated, reflecting a widespread revival of demand. Many commodity-exporting countries will also benefit from the higher level of energy and metal prices. While the modest rise in global commodity prices will exert some upward pressure on inflation in many countries, inflationary pressures remain contained across most developed and developing regions. According to United Nations’ World Economic Situation and Prospects 2018, World gross product is expected to expand by 3.2% in both 2018 and 2019. Among the advanced economies, United States is operating at or close to full capacity and is expected to reach 2.5 % in 2018 and 2.3 % in 2019. In Canada, the economy is expected to expand at a more moderate, but healthy pace of 2-2.2 % in 2018-2019. Elevated uncertainty surrounding the ongoing renegotiation of NAFTA will restrain the recovery in investment in the near term. In Japan, the GDP growth is forecasted at 1.6 %, reflecting improvements in both external and domestic demand. The growth outlook for Europe remains robust, but downside risks are high and are projected to expand by 2.1 % this year and 1.9 % in 2019. Among the developing economies, China’s growth is expected to remain solid, supported by robust consumer spending and is projected to gradually moderate from 6.9 % in 2017 to 6.5 % in 2018 and 6.3 % in 2019. Growth in many countries, including Indonesia, the Philippines and Thailand, will be supported by large infrastructure projects, which will help to alleviate structural bottlenecks and boost productivity growth in the medium term. Going ahead, the countries need to focus on accelerating the process of economic diversification, tackling high and/or rising levels of inequality, supporting essential investment and strengthening institutions and governance to build a more transparent and dynamic business environment. The ongoing rise in economic risks makes this challenge all the more imperative, to build resilience in advance of any forthcoming economic shocks. SPECIAL FEATURE  Regional analysis of the IMD World Competiveness Ranking 2018  IMD World Competitiveness Rankings emphasize a long-term trend highlighted in past editions – that the countries on the top of the list each have a unique approach to becoming competitive. The top five most competitive economies in the world remain the same as in the previous year, but their order changes. The United States returns to the first spot, followed by Hong Kong, Singapore, the Netherlands and Switzerland. The United States improves three positions from last year while Hong Kong drops one spot and Singapore remains 3rd. The return of the United States to the top is driven by its strength in economic performance (1st) and infrastructure (1st). Hong Kong takes a somewhat different approach exploiting its government efficiency (1st) and business efficiency (1st). This special feature provides a brief analysis of the rankings of the regions primarily Asia, Europe, Middle East, South Africa and Latin America while focusing on the shift in the rankings of the countries lying in these regions.                                                 To read the complete special feature, download the GEM newsletter edition May 2018.