by John J. Metzler
Weirs Times Contributing Writer
UNITED NATIONS -The world economy is slowly improving with a forecast for 2.7 percent global growth, but there’s still a way to go to reach pre-recession levels. That’s part of the prognosis of the UN’s World Economic Situation midterm report for 2017 which cites stronger economic recovery in many developed economies such as the U.S., Japan and the European Union, but warns of a deterioration in many developing countries especially in Africa.
The American economy is performing better than the UN’s start of the year estimates with growth for 2017 expected to reach 2.1 percent. According to the Report, economic activity in the United States accelerated; investment in mining industries rebounded. This of course reflects the Trump Administration’s commitment to revive the coal mining and steel industries. Equally, high post-election consumer confidence has led to a generally more favorable economic perception throughout the USA and has supported wider job creation.
The Report adds, “Significant tax cuts and an infrastructure investment program are under discussion in the United States.” Should such overdue measures pass Congress, the U.S. economy will see further expansion.
Yet the Report warns, “The policy environment in the United States remains turbulent, as proposals by the Administration confront Congressional and judicial hurdles.” This becomes abundantly clear when viewing Administration policy inside the maelstrom of partisan political infighting. Moreover, question marks concerning established trade policy have shadowed the commercial environment with key partners such as Canada and Mexico.
Slow but certain growth is predicted in Japan with a rise of 1.1 percent and in the European Union where growth still remains steady at 1.7 percent.
The Report stresses, “East and South Asia remain the world’s most dynamic regions, benefiting from robust domestic demand and supportive macroeconomic policies.”
In East Asia growth numbers remain robust with overall growth at 5.6 and South Asia at 7.1 percent for 2017. Growth in China is projected to dip from 6.7 percent last year to 6.5 percent this year and in 2018.
India stands alone as a major country with growth slated for 7.3 percent this year and a projected 7.9 percent in 2018. This is a far cry from the lackluster “Hindu rate of growth” prior to the 1990’s when India’s democratic socialist governments served as a drag on development.
But there are many downdrafts. Turkey’s once robust economy has gone into decline largely as a result of repeated shockwaves from the Syrian crisis as well as President Erdogan’s moves towards his confrontational authoritarianism both domestically and with the European Union.
A few years ago economists and laymen alike were enchanted by the growth potential of the so- called BRICS, namely the high growth economies of Brazil, Russia, India, China and South Africa. Today the narrative has changed dramatically.
In Latin America, especially Brazil, the high octane growth of a decade ago has been replaced by dismal negative growth numbers; minus 3.8 percent in 2015 and minus 3.6 percent last year. While Brazil has been pulled into the vortex of major political scandals regarding an impeached President, the fact remains that for 2017 growth is slated at a negligible 0.1 percent but hopefully 2.6 percent next year. Other Latin giants like Venezuela are in economic free fall.
And the other BRICS? The Russian Federation seems to have broken from the negative growth rates such as minus 3 percent in 2015 and is expected to expand 1.5 percent this year and next. Russian growth is based on higher petroleum and natural resource prices.
India has benefited from the market friendly and increasingly enterprise driven policies of the Modi government which have vastly improved India’s long underperforming economic standing. China has registered a firm 6.5 percent growth rate but faces the entrenched corruption and cronyism of Beijing’s corporate state.
South Africa has lagged sadly, not only because of a fall in commodity prices but a divisive political climate as well.
In the meantime the survey warns, “ The outlook for some developing regions has deteriorated, particularly in Africa.” Central and West Africa have seen downward forecasts.
American policy serves as an economic locomotive for both world trade and investment. While the Report cautions, “The United States has announced a sweeping review of its existing trade relationships,” but equally the “policy agenda in the United States also encompasses some upside potential, which may have positive global spillovers” such as lower corporate taxes and an emphasis on infrastructure spending.
Amid changeable trade winds the global economy could be buffeted by political storm clouds gathering in the USA.
John J. Metzler is a United Nations correspondent covering diplomatic and defense issues He is the author of Divided Dynamism The Diplomacy of Separated Nations: Germany, Korea, China.