2018: Fastest economic growth in 6 years

  • By Elizabeth Fry
Fast economic growth

Global economic growth is on track to be the fastest since 2011, according to PwC.

The global economy is set to grow by almost 4 per cent in 2018 in purchasing power parity (PPP) terms, adding an extra US$5 trillion to global output at current values, the financial advisory firm calculated.

More importantly, PwC expects growth to be broad based and synchronised, rather than dependent on a few countries.

The main engines of the global economy - the US, emerging Asia and the Eurozone - are expected to contribute almost 70 per cent of economic growth in 2017 in PPP terms.

This is up on the 60 per cent of world GDP these regions contributed in 2017 and up too on their post-2000 average of around 60 per cent.

Few star performers

Growth in the Eurozone is predicted to be above 2 per cent in 2018 as PwC expects the peripheral economies to outpace the core for the fifth consecutive year. 

Of the larger Eurozone economies, the Netherlands is expected to lead the way with economic growth at 2.5 per cent. 

By contrast, uncertainty relating to Brexit is expected to drag on UK growth, which is predicted to be 1.4 per cent in 2018.

Barret Kupelian, PwC’s senior economist said:“We expect global economic growth to be broadly based in 2018, rather than dependent on a few star performers. 

“While the growth outlook for 2018 is positive, there are some downside risks for business to bear in mind, including the progress of the Brexit negotiations and wider discussions about the future of the European Union”

Energy gobblers

Like other commentators, Kupelian says the 2018 year will mark the beginning of the end of easy money. 

“Since the Fed started to gradually reduce the size of its balance sheet and raise rates, the question has been who will follow next.

"We think the European Central Bank could further reduce its monthly asset purchases in 2018, although a dramatic shift in monetary policy in Japan is unlikely." 

One of Kupelian’s predictions refers to the global economy being the biggest, and most energy hungry ever.

“More than 600 quadrillion British Thermal Units of energy could be consumed by the global economy in 2018, the highest level on record and double that of 1980.”

Reflecting the slow shift towards renewables, the not so great news is that just10 per cent of global energy consumption is expected to be in renewables with China consuming twice as much renewable energy as the US.    

Oil prices stable

In 2018, the aggregate G7 unemployment rate is on course to hit a 40 year low below 5 per cent, PwC estimated.

Oil prices are set to remain broadly stable in real terms, with OPEC and its allies extending its 1.8 million barrels per day supply cut until the end of next year.

And, China, the world’s largest economy, could grow by between 6 and 7 per cent in 2018, slowing down in line with expectation.

The financial advisory firm is also forecasting an extra 80 million people are likely to be added to the world’s population in 2018, but as a percentage increase this would be the slowest since 1950.

For every 10 people added to the world’s population, PwC reckons 9 will be located in either Africa or Asia.