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As the year 2018 begins Sean Bunting Color Rush Jersey , the world economy is gathering speed. The new World Economic Outlook Update revises our forecast for the world economy鈥檚 growth in both 2018 and 2019 to 3.9 percent. For both years, that is 0.2 percentage points higher than last October鈥檚 forecast, and 0.2 percentage points higher than our current estimate of last year鈥檚 global growth.

This is good news. But political leaders and policymakers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long. The global financial crisis may seem firmly behind us, but without prompt action to address structural growth impediments, enhance the inclusiveness of growth, and build policy buffers and resilience, the next downturn will come sooner and be harder to fight.


Every government should be asking itself three questions today. First Devin White Color Rush Jersey , how can we raise economic efficiency and output levels over the longer term? Second, how can we support resilience and inclusiveness while reducing the likelihood that the current upswing ends in an abrupt slowdown or even a new crisis? Third, how can we be sure to have the policy tools we will need to counter the next downturn?


Near-term prospects


Looking first at where we are now, how do we see the world economy in the near term?


The primary sources of GDP acceleration so far have been in Europe and Asia, with improved performance also in the United States, Canada, and some large emerging markets Black Ali Marpet Jersey , notably Brazil and Russia, both of which shrank in 2016, and Turkey. Much of this momentum will carry through into the near term. The recent U.S. tax legislation will contribute noticeably to U.S. growth over the next few years, largely because of the temporary exceptional investment incentives that it offers. This short-term growth boost will have positive, albeit short-lived, output spillovers for U.S. trade partners, but will also likely widen the U.S. current account deficit Black Donovan Smith Jersey , strengthen the dollar, and affect international investment flows.


Trade is again growing faster than global income, driven in part by higher global investment, and commodity prices have moved up, benefiting those countries that depend on commodity exports.


Even as economies return to full employment, inflation pressures remain contained and nominal wage growth is subdued. Financial conditions are quite easy, with booming equity markets Black Noah Spence Jersey , low long-term government borrowing costs, compressed corporate spreads, and attractive borrowing terms for emerging market and developing economies.


Explaining the upturn


The current upturn did not arise by chance. It began to take hold in mid-2016 and owes much to accommodative macroeconomic policies, which supported market sentiment and hastened natural healing processes.


Monetary policy has long been and remains accommodative in the largest countries, underpinning the current easy global financial conditions. Even though the United States Federal Reserve continues to raise interest rates gradually, it has been cautious, having wisely responded to the turbulence of early 2016 by postponing previously expected rate increases. The European Central Bank has started to taper its large-scale asset purchases Black Vernon Hargreaves III Jersey , which have played a critical role in reviving euro area growth, but has also signaled that interest-rate increases are a more distant prospect.


Moreover, fiscal policy in advanced economies has, on balance, shifted from contractionary to roughly neutral over the past few years, while China has provided considerable fiscal support since its growth slowed at mid-decade, with important positive spillovers to its trade partners. In the U.S. Black Kendell Beckwith Jersey , of course, fiscal policy is about to take a markedly expansionary turn, with complex effects on the world economy.




Advanced economies are leading the upswing, but once their output gaps close, they will return to longer-term growth rates that we still expect to be well below pre-crisis rates. While we project advanced-economy growth of 2.3 percent in 2018 Black Chris Godwin Jersey , our assessment of the group鈥檚 longer-term potential growth is only about two-thirds as high. Demographic change and lower productivity growth pose obvious challenges that call for major investments in people and research. Fuel exporters face especially bleak prospects and must find ways to diversify their economies.
The two biggest national economies driving current and near-term future growth are predictably headed for slower growth. China will both cut back the fiscal stimulus of the last couple of years and, in line with the stated intentions of its authorities, rein in credit growth to strengthen its overextended financial system. Consistent with these plans, the country鈥檚 ongoing and necessary rebalancing process implies lower future growth. As for the United States, whatever output impact its tax cut will have on an economy so close to full employment will be paid back partially later in the form of lower growth, as temporary spending incentives (notably for investment) expire, and as increasing federal debt takes a toll over time.
As important as they have been to the recovery Black Justin Evans Jersey , easy financial conditions and fiscal support have also left a legacy of debt 鈥?government, and in some cases, corporate and household 鈥?in advanced and emerging economies alike. Inflation and interest rates remain low for now, but a sudden rise from current levels, perhaps due to procyclical policy developments, would tighten financial conditions globally and prompt markets to re-evaluate debt sustainability in some cases

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