2018 global growth to roll to highs not seen in eight years

BENGALURU: The global economy is expected to grow at a robust pace this year and reach an altitude not seen since 2010, as momentum builds in developed economies and inflation revives, Reuters polls of over 500 economists showed.
Major central banks are expected to move away from ultra-easy monetary policy this year, but borrowing costs are still accommodative and should underpin growth.
The latest polls taken this month, covering more than 45 countries, not only underscored optimism on growth but also showed inflation forecasts were either upgraded or left unchanged in nearly 70 per cent of those economies.
“For the first time in a long while, global growth is speeding up away from its average rather than recovering back towards it,” said James Sweeney, chief economist at Credit Suisse.
The global economy is predicted to grow 3.7 per cent this year, the fastest since the 4.3 per cent in 2010.
That was an upgrade from the 3.6 per cent predicted in October’s poll but lower than the International Monetary Fund’s outlook of 3.9 per cent growth this year.
Nearly 70 per cent of over 140 respondents who answered an extra question said the global economic boom was more likely to gain momentum this year and push inflation higher than currently predicted.
Those expectations were largely driven by growth in developed economies, particularly the euro zone and the United States – which may not be firing on all cylinders yet but enough to keep things rolling.
Surging business and consumer confidence and steady job creation have left economists repeatedly raising growth estimates for the euro zone and its major economies.
The rising euro poses a threat in Europe and could challenge the European Central Bank as it moves to end its money printing by the end of the year.
“All the conditions for the classic macroeconomic sequencing of a growth phase have now come together.
All the countries in the EU have not only seen a return to positive growth but are showing a marked acceleration in activity,” wrote Michael Carey, chief US economist at Credit Agricole CIB, in a note.
“The ECB has again signalled that, despite the improved growth prospects, the process of monetary normalisation will be slow, and it has managed to lock market expectations into its timetable.”
But for Britain, above-target inflation and a buoyant job market won’t push the Bank of England to tighten policy until at least November as it waits to see how divorce talks with the EU develop.
The US economy was predicted to grow at its fastest pace in three years in 2018, fuelled by the biggest tax overhaul since the 1980s, but economists said the expected boost will be short-lived and will keep the Federal Reserve on track with its current guidance of three interest rate increases this year. One conclusion from the latest surveys was inflation expectations, which showed the risk is now skewed more to the upside with last year’s pessimism somewhat tempered. — Reuters