Global Economy Picks Ups Speed, Says Atradius Worldwide

The global economy is continuing to strengthen, notes Atradius Worldwide, a consultancy specializing in trade credit insurance, surety and debt collections.

In its latest “Economic Update,” analysts say worldwide growth is expected to increase 3.0% in 2017 and 2018. GDP growth is underpinned by a strong U.S. economy, falling unemployment and improving consumer and business confidence across advanced markets.

The main challenges to the global outlook – low inflation, negative bond yields, austerity, and low commodity prices – are slowly phasing out. The outlook for emerging markets is brighter than 2016 as well, as Brazil and Russia emerge from recession and access to finance remains favourable. While the global economic outlook is more robust than years past, political risk remains a downside risk to stability.

As SCMR noted last month, Atradius said that the relatively “benign” outlook for emerging market economies in 2017 would continue, however.

“Steady growth and consistent development of the key measures is predicted for the balance of the year,” said David Huey, the consultancy's president, and regional director.

In an interview with SCMR, he said the lack of any significant movement in the main indices on a month to month basis is a reflection of the steady progress of the advanced markets year-to-date.

“While there remain some possible headwinds caused by political uncertainty, oil prices, labor figures and growth projections have all shown little volatility in 2017,” he said. “Similarly, the insolvency figures have been steady or declining, with Australia a notable exception, but that is on an aggregated basis. A more granular analysis reveals there are still some expected pain points on an industry basis, retail and metals in particular.”

Not only is global GDP strengthening, but also is global trade growth. After a lackluster 1.3% expansion in 2016, trade growth (12- month rolling average, y-o-y) has picked up to 2.4% as of April 2017. Despite policy uncertainty, most high-frequency indicators point to sustained growth: the global manufacturing PMI has been above the 50 neutral mark for 17 consecutive months while new export orders also showed 12 months of improvements and are at the highest level in six years.

Atradius forecasts full-year global trade growth to reach 3.2% in 2017, compared to 1.3% in 2016. However, policy uncertainty, mainly related to potential protectionism, remains a concern for the positive outlook.

Oil prices remain just below $50 per barrel of Brent crude. The persistent weakness is in spite of the OPEC production cut, as supply and inventories in the US have continued to increase. OPEC is expected to maintain its production cut agreement though to end- 2018 and to phase it out gradually in order to avoid sharp disruptions. Oil prices are expected to remain muted in the short term: the U.S. Energy Information Administration forecasts a barrel of Brent to average $51 in 2017 and $52 in 2018.

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