• Global economy likely to grow sustainably and moderately higher
• US - sustained economic expansion expected
• Eurozone - growth to continue, but likely to moderate slightly
• UK - growth likely to decelerate further
• Japan - growth to continue, yet some moderation is expected
• China - growth likely to slow down only gradually
• ASEAN - well placed for another year of strong growth

The global acceleration in economic growth has largely been sustained in both the developed and developing world. The global economy has been witnessing synchronized, broad based and strengthening economic expansion over this year. Supporting this global economic expansion has been the dynamic of strengthening domestic demand, accompanied by strong global trade, rise in commodity prices and subdued inflation in most economies. Complementing strengthening consumption demand has been the pick-up in business investment across a broad range of economies over this year.

The global economy is likely to grow sustainably and moderately higher in 2018 relative to 2017. We expect economic growth in developed markets to remain moderate in 2018, while strong emergingmarket growth should soften a bit. Improving fundamentals in the United States, Europe, and Japan should help offset weakness in the United Kingdom. China’s ongoing effort to rebalance from a capital-intensive exporter to a more consumer-based economy remains a risk, as does the need for structural business-model adjustments across emerging-market economies. We do not anticipate a Chinese “hard landing” in 2018, but the Chinese economy should cool.

As already noted, incoming data suggest that global GDP growth has strengthened somewhat this year relative to 2016 and we look for global growth to edge higher in 2018 (chart 1). That said a return to the supercharged growth rates of 2003-2007, when global GDP grew in excess of 5.0% per annum on average, does not seem likely anytime soon.

The continual growths of major advanced economies and synchronized recovery of the global economy will put higher pressures on primary commodity prices and inflation dynamic in major economies to increase gradually.

Nevertheless, over the remainder of 2017 and 2018 there remain some limitations and risk factors that could pose some challenges to the global economy and monetary policy directions in major economies to diverge from the baseline scenario, and lead to fluctuations of the key currencies and global financial system. Among the risk factors includes:

(i) the progress of US’s tax reform and Budget Blueprint which is likely to be inert;

(ii) the US’s trade policy and the result of the NAFTA negotiation that could affect economic sentiments and limit global trade expansion;

(iii) the negotiation on BREXIT could be prolonged and derail economic recovery of the Eurozone and the UK; and

(iv) the geopolitical tensions (Europe, the Middle East, North Korea, and the US)

Source: BIMB Securities Research - 19 Dec 2017