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Global economic growth set for seven-year high

The global economy will grow by almost 4% in purchasing power parity terms this year – the fastest rate of expansion recorded since 2011.

03 JAN 2018 | CHRIS SEEKINGS
web_globalgrowth_shutterstock.jpg
Global growth to rocket ©Shutterstock

That is according to research by PricewaterhouseCoopers (PwC), which predicts an extra $5trn (£3.7trn) of output in 2018, with the US, emerging Asia and the Eurozone fuelling growth.

These countries and regions are expected to be responsible for almost 70% of the increase, compared with their post-2000 average of around 60%, with China growing by 6-7%.

Expansion in the Eurozone is predicted to be above 2% this year, with the Netherlands leading the larger countries at 2.5%, however, it is thought that Brexit could drag UK growth down to 1.4%.

“While the growth outlook for 2018 is positive, there are some downside risks, including the progress of the Brexit negotiations and wider discussions about the future of the EU,” PwC economist, Barret Kupelian, said.

This comes after the International Monetary Fund cut its UK economic growth forecast from 1.7% to 1.6% for 2017, predicting a further fall to 1.5% this year.

The organisation said Brexit uncertainty was largely responsible for this, causing firms to delay investment plans, and that the depreciation in value of the pound continues to hit wages amid inflationary pressures.

“Some may make the argument that there has been a positive impact for manufacturers as a result of the fall in sterling,” The Share Centre investment research analyst, Helal Miah, said.

“This is all well and good, and we hope that that more benefits could emerge over time, but it’s clear the overall impact has been negative.”

Despite the relatively grim outlook for UK growth, Miah went on to say that investors should not be overly concerned by the forecasts, with current market valuations trading near all-time highs.

“It’s our view that the UK equity market still represents some great opportunities,” he continued.

“For income investors, there are the superior yields over cash and bonds, while growth opportunities exist for the many UK-listed firms with large overseas exposure.

“The more UK-focused companies haven’t performed as well this year, owing to the slowdown in UK activity, so there are many value opportunities amongst the domestic cohort.”


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