Economy & Markets

Growth in advanced economies will be stable, while emerging market growth will accelerate

By James Langton |

With solid growth in the advanced economies and a broadening recovery in emerging markets, global economic growth should stay above trend for the next couple of years, according to a new report from Moody's Investors Service.

Global gross domestic product (GDP) growth will reach 3.2% in 2018 and 3.1% in 2019, the report forecasts. This is in line with expectations for 2017, and represents an increase from 2.5% growth in 2016.

Moreover, unlike in recent years, growth is expected to be more broad-based and sustainable in the year ahead, the report says.

"We are seeing growth broadening globally, with emerging market countries finally trending up and China becoming more stable," says Madhavi Bokil, vice president at Moody's, in a statement. "Our outlook is more optimistic today than a year ago. We now have greater confidence that the prevailing growth momentum will last over the near term, notwithstanding an unforeseen shock."

For the G20 advanced economies, growth is expected to be stable over the next couple of years, according to the report, with growth of approximately 2% in 2017, 2018 and 2019, compared with 1.5% in 2016.

For Canada in particular, the Moody's report forecasts 2.3% growth in 2018 and 1.9% in 2019, down from a forecast 2.9% growth in 2017. Indeed, the report notes that a number of advanced economies, including Canada and the U.S., are currently experiencing growth rates that are above their long-term potential; and that they are expected to slow in the years ahead.

For emerging market countries, the report projects growth of 5.4% in 2018, up from the 5% forecast for 2017. In particular, recovery in Argentina, Brazil, Mexico, Saudi Arabia and South Africa will drive emerging market growth, the report says.

"The near-term outlook is bolstered by a favorable balance of risks," says Elena Duggar, associate managing director at Moody's, in a statement. "Geopolitical risks, especially pertaining to a conflict on the Korean peninsula, the unclear direction of US trade policy and the potential for a significant asset price decline remain the biggest known risks to growth."