Strong Global Growth Expected Next Year But Downside Risks Remain

KUALA LUMPUR, Oct 21 (Bernama) -- Global economic growth is anticipated to expand 3.4 per cent next year, compared with 3.1 per cent this year, thanks to improvements in the United States (US), as well as stronger performance in the emerging markets and developing economies. Notwithstanding the improvement in global growth, downside risks remain for the world economy, according to the Economic Report 2016/2017 released by the Ministry of Finance on Friday. The US is expected to record higher growth of 2.2 per cent versus 1.6 per cent in 2016, due to stronger business investments and a positive housing market. The Euro area is likely to register moderate growth of 1.5 per cent from 1.7 per cent, as Brexit uncertainties affect business and consumer confidence. Similarly, growth is also expected to be slower at 1.1 per cent from 1.8 per cent in the United Kingdom. Japan's economy may grow 0.6 per cent from 0.5 per cent amid the delay in a consumption tax hike from April 2017 to Oct 2019 coupled with the implementation of other fiscal and monetary measures. In emerging markets and developing economies, growth is expected to increase 4.6 per cent versus 4.2 per cent, supported by the strong performance of China and India, as well as ASEAN economies. China is expected to register growth of 6.2 per cent from 6.6 per cent, driven by sustained domestic consumption and continued growth in the services sector, following the government's rebalancing initiatives. India, meanwhile, is expected to sustain its growth momentum at 7.6 per cent, largely contributed by strong private consumption as well as a growing services sector. ASEAN is expected to post a higher growth of 4.8 per cent from 4.5 per cent, driven by consumption and infrastructure investments. However, the report said the possibility of a sharper slowdown in China might affect countries with closer financial, trade and investment links. The Brexit outcome could be more severe than expected, especially in the Euro area and the UK, as well as, possible spillover effects on the global economy. Other downside risks include volatility in the global financial markets and capital flows, continued low commodity prices, subdued global trade, currency pressures, prolonged low inflation, as well as, escalating geopolitical tensions. Meanwhile, the report said inflation in the advanced economies is expected to increase to 1.7 per cent from 0.8 per cent with higher private consumption. Low commodity prices is anticipated to slightly reduce inflation to 4.4 per cent from 4.5 per cent in the emerging markets and developing economies. On world trade, the report said it is expected to grow 3.8 per cent from 4.5 per cent, in line with the improvement in global demand, especially in the US as well as several emerging markets and developing economies such as China, India and ASEAN. --BERNAMA