Donald Trump will be sworn into office as the President of The United States in nine days. His success was one of the greatest political upsets of our time and his campaign was long on rhetoric and short on detail with respect to the exact economic policies that his administration will seek to enact. This lack of clarity has fed into the World Bank’s projection for growth in 2017.
In the view of the World Bank, the modest post Global Financial Growth pattern is set to continue this year with growth of 2.7%, slightly better than last year’s level of 2.3%. The Bank anticipates that the relative gain over last year will be due to growth in emerging markets and developing economies rather than the major economies.
The hike in US interest rates in December 2015 and the resurgence of the US Dollar have caused “notable tightening of financial conditions” around the world, making borrowing more expensive and harder to obtain in the very economies expected to grow most. This is offset by stronger prices for commodities including oil and metals (which are priced in Dollars) which many of these nations export.
The Bank is predicting that the slowdown of growth in Brazil and Russia will reverse this year. The major economies are expected to grow by 1.8% in 2017, a slight improvement over last year.
Mr Trump made some protectionist noises during the campaign which could reduce global trade, threatening to terminate some trade agreements and increase tariffs on some imports. He also suggested that he would cut personal taxation, business taxes and boost investment in US infrastructure which could boost US (and global) growth. At the moment, nobody seems to be sure just what his economic programme will be and whether it would survive passage through the House and Senate (both now under the control of his Republican Party).
Uncertainty over the effect of Brexit (which as we all know means Brexit) on the UK and wider EU economies is also a source of uncertainty for global growth.