NEW YORK / Reuters
The global economy is set to grow at a faster clip than anticipated in 2018, due mostly to lower tax rates in the United States, but tensions over trade threaten to derail months of synchronised global expansion, the Institute of Internatio-nal Finance (IIF) said on Monday.
The Institute, a global financial industry association, lifted its forecast for global growth in 2018 by 0.2 percentage points to 3.5 percent as it boosted its growth view on the US economy for the current year to 2.9 percent. The US economy grew 2.3 percent in 2017 according to IIF. It’s previous 2018 forecast, before tax cuts were enacted late last year, was for the US economy to grow 2.4 percent in 2018.
“You have the US, where there is important fiscal stimulus because of tax reform, and this is going to boost consumption and investment,” said Sergi Lanau, deputy chief economist at IIF. According to the report, faster US growth is “the key driver of the upward revision.”
However, the synchronized growth that the global economy saw through 2017 for the first time in a decade is showing fissures, as exporters see pressure due to uncertainty over global trade. Lanau pointed to recent weak economic data out of Germany as evidence of the effect of trade uncertainty. German exports plunged unexpectedly in February, posting their biggest monthly drop in more than two years.
Also, softening data on new export orders in Japan and Korea are “consistent with the idea that there is some uncertainty around what trade policies will look like down the road,” Lanau said.