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Wednesday, 20 December 2017

Global growth to continue outperforming expectations in 2018 -Hatzius

The global economy is on track to continue outperforming most predictions in 2018, says Goldman Sachs’ Chief Economist Jan Hatzius. Global GDP growth is expected to come at 4% in 2018, above the long-term trend and bringing unemployment rates down, he says.

Goldman Sachs is also bullish on emerging markets, saying that most EMs are “below their long-term capacity to produce,” which in Hatzius’ view should allow them to maintain strong growth for an extended period before their respective central banks need to slow things down. There is “more room to go” and, for now, inflation is below central bank targets in most places around the world, he says.

Global growth is set to be broad-based between EMs and developed economies for the time being, but that is “a story that’s likely to shift in the coming years as developed economies start to run up against capacity constraints,” Hatzius says. The challenges for 2018 include the trade policy debate in the US, national elections, but the political risks are “not that great,” he adds. “Bottom line is … we have strong growth and low inflation. And while central banks are moving towards the exit, so far they’ve done that in a way that is relatively market-friendly and really well-digested by markets … for now, it’s quite a friendly environment.”

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