Global economic growth is expected to be strong this year, but the prospect of a trade war represents an emerging downside risk, says Moody’s Investors Service in a new report.
With favourable financial conditions, and a positive outlook for both consumer and business sentiment, economic growth is expected to “hit a high water mark in 2018”, the report says.
However, if “trade tensions boil over … they would pose risk to the otherwise positive growth outlook,” the report warns. The recent introduction of higher U.S. tariffs heightens the potential for increasing global trade tensions, it says.
“We expect global economic momentum over the next year or so to remain quite high. But 2018 will likely be a peak year for growth. Rising inflation will call for tighter monetary policy, and this will then moderate growth, bringing it closer to the long term trend,” says Madhavi Bokil, vice president and senior analyst at Moody’s, in a statement.
At the same time, Moody’s also sees an upside for growth due to emerging technologies, such as artificial intelligence (AI), which are increasingly being utilized by mainstream companies to enhance customer service and improve efficiency.
“From a credit perspectivethe question is less about a particular aspect of AI per se, but the extent to which firms have the financial capacity to invest in the technology and implement a strategic vision that helps them stay competitive,” says Robard Williams, senior vice president at Moody’s, in a statement.