By Yin Lei
The United Nations has revised its forecast for global economic growth to 3.2 percent for 2018 and 2019, up from the previous level of three percent as predicted five months ago in the World Economic Situation and Prospects 2018.
This rosier outlook, unveiled in a mid-year update last weekend, builds on the strong performances of developed economies, robust international trade, and benign inflation level across many countries.
Developed economies expect to remain on an upward trajectory.
America's GDP is projected to expand by 2.5 percent in 2018 and 2.3 percent in 2019.
Its stimulus measures aimed at cutting taxes for consumers and enterprises are set to increase household spending and corporate investments. With an unemployment rate of 4.1 percent, the U.S. economy is now reaching full capacity.
Japan is likely to grow at a faster rate of 1.6 percent this year versus the forecast of 1.2 percent made last December, reflecting an expected increase in internal and external demands.
The Eurozone may beat the previous expectations to register an economic growth of 2.1 percent in 2018 and 1.9 percent in 2019 as it sees a rise in private consumption, investments, and construction activities within this time span.
Economies in transition and the developing countries are expected to enjoy economic expansions as well.
Global trade is forecast to remain robust at a growth rate of 3.8 percent in 2018 and 2019.
In the first two months of 2018, import demand across the world all went up, driven partly by the upturn in the investment activities of the developed economies and a strong domestic demand in East Asia.
This stronger import demand is set to drive up commodity prices to bring more benefits to resource-exporting economies like those of the Commonwealth of Independent States (CIS).
Inflation for the two-year outlook period is expected to stay at a benign level across the world.
This will allow the developed economies to phase in monetary policy adjustments. Most developing economies and economies in transition may sustain their monetary policies that are supportive of growth.
Amid this rosy outlook, multiple risks also loom large.
Trade disputes among the world's several major economies, if unchecked, may play havoc with the global economy during its course of improvement.
Financial risks have been building up in recent years as debt levels rise across the world, heightened by the abundance of liquidities and low-cost borrowings.
In the U.S., the stimulus measures will widen the federal deficit to five percent in 2019 and drive up debts. Europe also faces medium-term challenges in this regard as it experiences a build-up of debts and housing bubbles.
In emerging economies, the ratio of debts versus their GDP had already reached 200 percent by the end of 2017. Many of these debts are not backed by productive assets and can pose financial risks to the global economy.
Changes in the fiscal policy of the U.S. may have implications for the world economy, which may affect the monetary policy adjustments in the developed economies and threaten a faster withdrawal of monetary stimuli.
Many developing countries that borrow heavily in the US dollars may take a blow and the real economy may suffer.
