Global Economy Gets Its Groove Back

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What's going on?

The World Bank has an optimistic message for the global economy in its latest set of predictions: growth should pick up next year to its fastest pace in almost seven years!

What does this mean?

The World Bank, an international development organization, is forecasting that global growth will hit 2.9% next year, up from the 2.7% growth it expects this year. The strengthening picture is expected to come from an acceleration of growth in both mature markets like the US and Europe as well as emerging markets, especially those that are dependent on selling commodities.


The World Bank also thinks global trade growth will grow 4% this year, up from 2.5% last year a significant reversal from declining trade growth that the world has experienced in recent years. And where there is increased trade, there is usually increased global growth.

Why should I care?

The bigger picture: This is just an estimate there are lots of risks to the forecast.

Its certainly good news that the World Bank is cheerier, but it also identified a number of risks to its forecast. For one, a Chinese slowdown would cause problems and the World Bank specifically cited Chinas high level of debt as a factor making that more likely. Relatedly, if a Chinese slowdown pushed down commodity prices (as seems to have already occurred to some extent), many emerging market economies wouldnt perform as well. Another risk the World Bank mentioned is potentially higher barriers to trade (a.k.a. protectionist policies) stemming from the Trump White House, hurting trade and thus the global economy.


For markets: Stocks are already betting on a growth pickup.

Stock prices tend to rise as investors increase their expectations for growth thats one major reason that global stocks have performed very well over the past year. So, in short, this news from the World Bank already appears to be largely reflected by markets.

Originally posted as part of the Finimize daily email.

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