global-and-regional-trends-and-prospects

global trends and prospects

1. Global and Regional Trends and Prospects Christna Rhea J. Cola

2. GLOBAL AND REGIONAL TRENDS AND PROSPECTS

3. Muted global economic recovery Since the 2008-2009 global financial crisis, global economic growth has been sluggish, without any immediate prospect of renewed economic vigor.1 From an average growth of 5.1 percent in 2003- 2007, global output growth slowed to an average of 3.2 percent in 2008-2015. After a weak outturn in 2016 (estimated at 3.1%), economic activity is expected to accelerate slowly in the medium term. Overall though, the global economy is seen to remain weak, with average growth rising only slightly to 3.6 percent in 2017- 2021.

4. Sluggish international Growth in global trade (export volume) also slowed significantly from an average of 8.3 percent in 2003-2007 to 3.0 percent in 2008- 2015. World merchandise trade volume is expected to have grown by just 2.2 percent in 2016, the slowest since the global financial crisis. Export growth is expected to improve only slightly to an average of 3.9 percent in 2017-2021. 

5. Surge in foreign investments Prior to the global financial crisis, global foreign direct investment (FDI) inflows averaged USD1.1 trillion from 2003-2007. This increased to an average USD1.4 trillion between 2008 and 2015. In 2015, global flows of FDI rose by about 40 percent, to USD1.8 trillion, the highest level since the global economic and financial crisis began in 2008. However, this growth did not translate to a proportionate expansion in productive capacity in all countries. Despite the decline in outflows from developing Asia by 17 percent, at USD332 billion, the region’s outward FDI in 2015 remained the third highest ever. Outward FDI from a number of Asian economies, including China and Thailand, increased. With outflows worth USD128 billion, China was the third largest investing country worldwide, after the United States of America and Japan. There are indications that intraregional investments are rising, and among the most important industries driving this development are infrastructure and electronics. In 2015, 53 percent of the value of greenfield projects came from developing Asia, particularly from China, India, the Republic of Korea, and Singapore.9

6. Asynchronous monetary policy in advance economies The  fiscal policies considered by the new US Administration, including reducing taxes and increasing infrastructure spending, are likely to raise the budget deficit and lead to higher interest rates. On the other hand, monetary authorities in the European Union (EU) and Japan are likely to maintain their accommodative stance in order to support the slow recovery of their economies. These unaligned policies produce volatilities in capital flows and in the exchange rate. 

7. Political trends (populist & Protectionist tendencies) This Photo by Unknown author is licensed under CC BY-NC . This Photo by Unknown author is licensed under CC BY-SA-NC .

8. Political trends (populist & Protectionist tendencies) Populism refers to a range of political stances that emphasise the idea of "the people" and often juxtapose this group against "the elite". ... According to the ideational approach, populism is often combined with other ideologies, such as nationalism, liberalism, or socialism.

9. Protectionist Protectionist policies  often seek to shield domestic producers and domestic workers from foreign competition. 

10. POLITICAL TRENDS (POPULIST & PROTECTIONIST TENDENCIES) World Trade Organization reports indicate that during the global financial and economic crises, there was a modest increase in protectionist pressures. The number of new measures remains high and the rollback of existing trade-restrictive measures continues to be slow. In addition, the rate of trade facilitating measures applied each month declined against the previous period, remaining below the 2009- 2015 trend.  Trade remedy investigations were the most popular trade-restrictive measures, representing 72 percent, which is above the average share observed since 2009. The G20 economies initiated much more trade remedy actions (61) than they terminated (36) during the latest reporting 11 WTO. November 2016. Report on G20 Trade Measures 12 WTO. November 2016. Report on G20 Trade Measures 13 WTO. November 2016. Report on G20 Trade Measures period. Metal products (particularly steel), chemicals, plastics, and rubber account for most of anti-dumping and countervailing initiations during the review period.

11. As a consequence of the global financial crisis, there has been a growing backlash against the consequences of globalization. Over the medium term, politicians and interest groups are expected to capitalize on the backlash to push for populist and protectionist agenda. This situation raises the risk of ushering in or reinforcing authoritarian governments.

12. Rise of fundamentalism The threat from terrorism has been growing, as illustrated by a number of recent attacks carried out in Europe, Asia, Africa, among others. While the Islamic State has suffered significant setbacks, it is likely to take several more years before the threat, including retaliation from the group and its other sympathizers, is fully neutralized. Generally, the Middle East will probably continue to be a region of instability.