An analysis by GlobalData, a leading data and analytics company, of 40 major economies classified by inflation and GDP growth over the last five years (2013-17) forecasts that Asia will drive the global economy in 2018. The company’s analysis categorizes each country by ‘Low’, ‘Moderate’ and ‘High’ GDP growth rate during 2013-17 together with identifying ‘High Inflationary Economies’.
High growth economies
Principally located in Asia and accounting for more than half of the world’s GDP growth in 2018, high growth economies will include Indonesia, India, Malaysia, The Philippines, China, Turkey and Ireland. Increased domestic consumption and expenditure combined with increased trade with the rest of the world is driving this category although China’s growth is forecast to slow down marginally in 2018.
Ramnivas Mundada, Economic Research Analyst at GlobalData, commented, ‘‘We anticipate that the Indian economy will achieve over 7% growth in 2018. This follows a number of key government interventions to drive the economy which includes digitalization and the relaxation of their foreign direct investment (FDI) policy for key sectors such as construction & real estate (which allows 100% FDI without any government approval).
‘Single brand retail, under which goods are sold to individual customers under the same brand also benefits from the FDI policy move (now allowed 100% FDI without any government approval as compared to 49% earlier) and increasing public pensions and wages which will inevitably drive spending.’’
Turkey’s continued growth helped by their export market recovery along with stronger commodity prices on key exports like iron and steel, gold, jewelry, etc., is expected to sustain through 2018. Ireland has the fastest growth rate of all global economies driven by increased investment in the construction sector, strong employment growth and robust consumer spending.
Moderate growth economies
European, North American and Middle Eastern economies will broadly experience only moderate economic growth in 2018. The rise in household consumption and expenditure and increased job creation will continue to drive economic growth in North American countries. Asia like low unemployment and increased economic activity remain positive in developed European nations especially in Germany and the Netherlands.
Asian economies such as Singapore, Hong Kong and South Korea which are sensitive to fluctuations in global trade performed well in 2017 and this trend is expected to continue through 2018. The Japanese government’s fiscal intervention, with the prime minister announcing a $17.8 billion stimulus package in September 2017, focusing on boosting corporate investments, child care and education, a strong labor market and improved exports growth are expected to maintain Japan’s economic growth throughout 2018.
Low growth economies
Owing to the fall in global commodity prices, the Russian and Brazilian economies declined in 2015 and 2016. However following a recovery of commodity prices in 2017 they are expected to post a marginal growth rate in 2018. The Italian economy has underperformed in recent years posting an average growth rate below 1% for the period 2013-2017 and is expected to stay at around the same level in 2018.
High inflationary economies
Since the floating of the Egyptian currency against the US dollar in November 2016, the Egyptian pound has depreciated sharply resulting in the inflation rate to soar. The inflation rate rose to 29.5% in 2017 from an average of 10.9% during 2013-2016. Meanwhile, the country has been growing at a modest pace over the last five years (2013-2017) which is expected to continue on the back of economic reforms initiated by the government, backed by a $12.0 billion three year IMF programme agreed in late 2016. The Iranian economy, which grew at an average rate of 2.4% during 2013 to 2017, has experienced very high inflation levels due to international sanctions. Similarly, Argentina and Nigeria have faced high inflation over the last five years, holding back their GDP performance significantly.