Growth

There has arguably never been a greater disconnect between the apparent strength of the global economy and the magnitude of geopolitical, financial and operational risks that organisations are facing. The Economist Intelligence Unit expects momentum in the global economy to remain strong in 2018. The US economy will continue to motor along, the euro area will absorb more of the slack in its labour markets and Chinese consumption, investment and exports will all remain strong. Higher commodity prices will prove a fillip for emerging-market exporters, while a gradual tightening of monetary conditions will not take hold to the extent that it slows growth. Taken together, these factors mean that the global economy is forecast to expand by 3% in 2018, up from a mediocre annual average pace of 2.6% in 2015-16.
Despite the encouraging headline growth figures, the global economy is facing the highest level of risk in years. Indeed, this favourable economic picture appears to come from a completely different world to the one where headlines are dominated by protectionist rhetoric, major territorial disputes, terrorism, surging cyber-crime and even the threat of nuclear war. The global economy has seen periods of high risk before, with threats emanating from the regional and the national level, as well as from state and non-state actors. What is unique about this period of heightened risk, however, is that unlike other periods in recent decades, risks are also originating from the global level, as the US questions its role in the world and partially abdicates from its responsibilities. These moves have signalled the end of the US-led global order and the beginning of a new order. Although the new order will emerge over the next decade, there will be a period of uncertainty as multiple global and regional powers vie for power and influence. For organisations attempting to negotiate these concerns in order to take advantage of the numerous and growing economic opportunities, the stakes are obviously high.
In this report we identify and assess the top ten risks to the global political and economic order. Each of the risks is not only outlined, but also rated in terms of its likelihood and its potential impact on the global economy. This is a small snapshot of our risk quantification capabilities. We also provide operational risk analysis on a country-by-country basis for 180 countries through our Risk Briefing. Meanwhile, we provide detailed credit risk assessments on 131 countries via our Country Risk Service.

If Sub-Saharan Africa’s future had to be encapsulated in a single word, it would be transformation. In recent years the continent has undergone significant economic, socio-political, and technological transformations, a process which is likely to accelerate over the coming decades. While it would be an overstatement to proclaim that the future will be African, there are strong indications that the global importance of the continent is set to rise – and not only as a source of risk factors spilling over from poverty and instability. By 2045, approximately a quarter of the world’s population will be African. Looking ahead, there is also the potential for Africa’s economic growth to outpace the global average. The expansion of foreign direct investment (FDI), which today already outstrips aid, could drive further integration of African countries in the world economy. The diversification of Africa’s relationship with external partners – which now not only include traditional Western partners such as the EU, but also Asian, Middle Eastern and Gulf countries – will also contribute to increasing Africa’s prominence in the global arena.

Ten years on from the global financial crisis, the prospects for a sustained economic recovery remain at risk due to a widespread failure on the part of leaders and policy-makers to put in place reforms necessary to underpin competitiveness and bring about much-needed increases in productivity, according to data from the World Economic Forum’s Global Competitiveness Report 2017-2018.

The world faces a confluence of changes and technological advances that are fundamentally altering the relationship between individuals, economies, and society. Innovations in a diverse set of fields including robotics, genetics, artificial intelligence, Internet-enabled sensors, and cloud computing are individually disruptive. Collectively they are world changing. Experts around the world have come up with different names and descriptions for this phenomenon: Klaus Schwab calls it the “fourth industrial revolution”; Alec Ross points toward the “industries of the future”; Steve Case recognizes it as the “third wave” of the Internet; and Martin Ford looks toward the “rise of the robots.”

Although these thinkers have slightly different visions for the future, there is a shared recognition that existing assumptions and economic models need adjustment. For both developed and developing countries, the innovation- and technology-driven economy offers significant risks and opportunities. On the one hand, this change offers the potential for increased global prosperity, efficiency, and quality of life. On the other hand, if poorly managed, this transition could disrupt employment models, pathways out of poverty, and stability around the world.

The European Union (EU), a vital partner for the United States, is facing numerous challenges, including massive migration flows, the UK’s vote to leave the EU (Brexit), and rising support for anti-EU and populist parties in upcoming elections in several European countries. In Charting the Future Now: European Economic Growth and its Importance to American Prosperity, the Atlantic Council’s EuroGrowth Initiative proposes pragmatic steps to restore European economic growth, safeguard the European project, and reinvigorate the transatlantic alliance.
Backed with rigorous data, the report highlights the crucial importance of the European economy for the US and proposes ways to galvanize the transatlantic relationship. Focusing on feasible projects and reforms, the report then looks at various policy proposals to increase growth and create jobs in the short, medium, and long term.

Over the ten-year Outlook period, agricultural markets are projected to remain weak, with growth in China weakening and biofuel policies having less impact on markets than in the past. Future growth in crop production will be attained mostly by increasing yields, and growth in meat and dairy production from both higher animal stocks and improved yields. Agricultural trade is expected to grow more slowly, but remain less sensitive to weak economic conditions than other sectors. These demand, supply and trade pressures are all evident in Southeast Asia, where this report identifies scope to improve agricultural productivity sustainably. Real prices are expected to remain flat or decline for most commodities.