Global Economic Outlook Is Stable

The global economy is continuing to perform strongly, with growth stabilizing at levels last seen more than two years ago in Q3. According to estimates by FocusEconomics, the global economy expanded 3.2% annually in Q3, matching the result in Q2. Q3’s reading mostly reflected improving economic dynamics in emerging-market economies such as Brazil and Russia, while developed nations continued expanding healthily on the back of rising real wages due to low inflation and largely accommodative monetary policies. While the global economy appears to be in a sweet spot, political developments are gradually taking center stage, threatening to undermine the current economic momentum. The fourth round of the North American Free Trade Agreement (NAFTA) negotiations ended on 17 October without a conclusive result. Canada and Mexico rejected proposals from the U.S. of increasing protectionism. Despite their opposition to U.S. demands, Canada and Mexico did not walk away, and a fifth round of talks will start in mid-November. U.S. President Donald Trump has stated that the U.S. will withdraw from the 23-year old deal if the countries cannot strike a deal to reshape it. The withdrawal of the U.S. from the trade deal will likely imply an increase in trade barriers in the continent, which would certainly have negative spillovers for the global economy. In Europe, while negotiations between the European Union and the United Kingdom did not break down in recent weeks, they have been shunted into the sidelines. Instead of focusing on their future trade agreements, both parties are getting stuck on other issues, such as the rights of EU citizens in Britain and the future of the Northern Irish border. All sides expect to reach an agreement before the 14–15 December Europe - From FocusEconomics


an Council meeting, in order to move to the next round of the negotiations. A further delay in the negotiations will increase uncertainty about the Brexit deal, threatening to derail Europe’s ongoing growth momentum. In Asia, the 19th National Congress of the Communist Party of China (CPC) held in Beijing on 18–24 October and the 22 October general elections in Japan allowed the leaders of China and Japan, respectively, to consolidate power. In China, Xi Jinping was reappointed as General Secretary of the CPC; he was also able to place more loyalists into the party’s top political bodies. As a result, Xi has amassed an amount of power unprecedented in China’s recent history, allowing him to comfortably implement his vision for the country: a more dominant role for China in the global arena and healthier economic growth based on consumption and services. More importantly, he did not signal any candidate to replace him once his second term expires in 2022, suggesting that he could opt for an unusual third mandate. In Japan, Prime Minister Shinzo Abe’s landslide victory will allow him to continue with his set of policies aimed at pulling the country out from years of sticky deflationary pressures and ensuring a more sustainable long-term growth. Moreover, the voters’ strong mandate paves the way for Abe to rewrite the country’s pacifist constitution and embolden Japan’s military capabilities, threatening to increase political instability in the region. -