Annual Report 2017

The world economy

At the beginning of 2018, the world economy continues to develop with solid growth. We assume that this dynamism will also continue as the year progresses. Growth prospects for both the advanced economies and the emerging markets are similarly positive as they were last year.

Most economic indicators suggest that the economy of the European Monetary Union (EMU) will grow at an above-average rate also in 2018. On the basis of robust domestic demand and a solid contribution from foreign trade, economic growth of close to 2.5 % should be possible. The European Central Bank will make use of the favorable economic outlook to gradually cut back its very expansive monetary policy of recent years. This applies in particular to the probable phasing out of the extensive bond-buying program. From today’s perspective, however, increases in key interest rates are not yet on the agenda. Growth prospects for the German economy are also positive and it could expand by 2.5 % this year. As the year 2018 will probably continue to be impacted by uncertainty relating to the EU exit conditions for the United Kingdom, the British economy is likely to continue its rather moderate development, an economic slump in the UK is unlikely.

In the United States, the available leading indicators point towards a continuation of the economy’s solid upswing. In view of stable domestic demand, moderate inflation and low unemployment, the US Federal Reserve is likely to maintain its slightly restrictive monetary policy with only small interest-rate rises. In connection with stimulus from the tax reform passed in late 2017, this could result in overall growth of just above 2.5 %, and thus slight acceleration compared with 2017.

The growth prospects of the Japanese economy also remain relatively stable. Although growth in private consumption and investment should weaken slightly, an increase in gross domestic product (GDP) of between 1 and 1.5 % is expected.

The emerging economies should achieve aggregate growth in output of just over 4.5 % in 2018, as in the previous year and thus in line with their long-term trend. The prospects of the Chinese economy, based on its very robust development in the year 2017, are favorable for this year as well. However, due to reduced state economic stimulus and rather more restrictive lending, most analysts anticipate a slight decrease in growth to about 6.5 %. While the economies of Central and Eastern Europe will probably not quite match their strong growth of the previous year, an acceleration of growth is expected for the South American economies. But with anticipated GDP growth of 2 to 2.5 %, South America remains below its potential. The further stabilization of raw-material prices should help the countries of the Middle East, but their expected growth rates of just under 3 % remain below average for that region.

Overall, the world economy should grow in 2018 by significantly more than 3 %, a similarly favorable rate of expansion as in the previous year.

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