Many international forecasters fear that year 2017 won’t be an improvement of 2016 for sluggish global economy. With lots of risks ahead including economic and geopolitical instability, there are several challenges facing the world economy this 2017.
The IMF or International Monetary Fund warned that the increasing populism as well as protectionism have correlated with the stagnating economic growth. In the latest analysis of experts, they warned that turning back the clock on the trade can deepen only and prolong the current doldrums of the world economy.
European Instability and Brexit
With the national elections set for Germany, the Netherlands, and France, each of these feature far right candidate, there’s a potential for economically damaging policies in the Euro Zone. Nevertheless, such merely form a backdrop for the most important geopolitical event to occur this 2017, the triggering of Article 50 of Britain and commencement of slow exit from European Union. While the influence of Britain in the global economy has reduced in recent years, the effect of Brexit was felt in the currencies and markets around the world. The fact that the markets are rattled was shown currently by the fall of British pound. The longer this continues, the longer associated uncertainty will be priced into the currencies and equities, dampening corporate investment as well as damaging the economy of European as a whole.
Tighter Fiscal Policies Weight
The report of IMF predicted fiscal policies in developed economies could tighten even further this year in spite of the calls for increased government spending to drive growth. In a recent survey of the money managers, they have found that forty-eight percent believe that the global fiscal policy remains very tight, a sentiment echoed by countless other economic commentators worries over the monetary policy’s increasing ineffectiveness. However, while West tightens, many hope that China continues the fiscal policy splurge, which is fueled by the desire to keep the economic growth at acceptable levels ahead of the nineteenth National Congress this 2017.
The Commodity Recovery Reverses
Having annihilated economic growth in Russia, Brazil, Nigeria, and some considered rising star economies in year 2016, the commodity prices will see only a modest recovery in 2017. Softer commodity prices disproportionately hurt the emerging economies that in recently made an uneven contribution to worldwide economic growth. Though emerging Asia as well as India have appeared resilient, IMF fears that the sub-Saharan Africa, CIS region, the Middle East, and South America won’t fare very well, especially if the OPEC failed to reach an agreement on the oil production cuts.
The experienced contractions by several of major emerging economies in year 2016 and the sluggish growth being fought by most developed countries suggests that this year is another challenging year for the global economy. Every world leader will face a hard time keeping the worldwide recovery on track for the coming years, even while terrorism, wars, and threats add to these global market challenges. However, in spite of such challenges, world leaders are trying their best to fix things one by one.