2017.04.2015:13:00UTC+00Cyclical Recovery of Global Economy to Continue, Likely to Expand 3.2 Pct in 2017

In the past six-months, the global economy has witnessed a cyclical rebound, noted DNB in its research report. The rebound in global economy is because of better expansion in emerging markets as well as in advanced economies. Soft indicators have recorded better improvements than hard indicators. This cyclical recovery is likely to continue in the future. According to DNB, the global economy is expected to grow 3.2 percent this year and 3.4 percent in 2018 from 3 percent in 2016. The expected growth would be mostly due to higher growth in the U.S and in emerging markets except China. Meanwhile, economic growth in other large economies is likely to soften.

In recent years, jobless rate has declined noticeably in advanced economies. Jobless rate in the U.K., U.S, and Japan is either at or slightly below the normal level, whereas in the euro area it is still a bit higher than the normal level. Given the continued growth above potential, capacity utilization in advanced economies are likely to continue to rise in the years ahead and unemployment will decrease further, stated DNB. Meanwhile, inflation is likely to accelerate in advanced economies this year, owing to higher energy prices. Following that, inflation is expected to moderate because of continued moderate wage growth.

Meanwhile, the U.S. Fed is likely to hike the Fed Funds rate twice in 2017 and further three times until mid-2019. After that the Fed is expected pause because of softer growth prospects. The European Central Bank is also likely to hike the deposit rate to 0 percent in the first half of 2019, as a one-off adjustment to remove an unconventional policy tool, added DNB.