While some of the largest risks to advanced economies have waned and emerging markets continue to expand, Moody’s Investors Service sees an improved outlook for global growth this year.
G20 economies should grow at a 3.1% annual rate in 2017 and 2018, compared with 2.6% growth in 2016, Moody’s analysts said. Meanwhile, the potential threat posed from protectionist policies in the U.S. appears to have eased at present.
"Overall, global growth is looking increasingly sustainable with economic data surprising to the upside in a number of emerging market countries," said Madhavi Bokil, a vice president and senior analyst at Moody's. "The current momentum should continue, barring any negative surprises."
In China, Moody’s expects growth to continue to slow this year—at a rate of about 6.6%—thanks to reduced property-related investment connected to central bank liquidity tightening, including limits on home mortgage lending. "We continue to believe that the near-term risk of disorderly deceleration of growth in China is limited," said Elena Duggar, an associate managing director at Moody's.
"Government policy will target limiting the growth of leverage, rather than bring about a rapid deleveraging that could be potentially destabilizing."
Prospects for India are bright—growth of 7.2% this year and 7.7% in 2018—as the government recovers from the impact of last year’s demonetization efforts and continues to push through reforms that will help “…reduce inefficiencies and improve trend growth in the long run,” Moody’s analysts said.
Global growth is still hampered, however, by “…changing demographics, muted investment, low productivity growth and stagnant wages,” the ratings firm said.
– Nicholas Stern, senior editor