It’s been 12 days since we ushered in a new year and a lot has already happened.
On the local front, the Tax Reform for Acceleration and Inclusion or Train Law is now in effect while talks of revising the 1987 Constitution and shift to a federal form of government have taken over the headlines. Agaton, the first tropical depression of 2018, lashed portions of the Visayas and Mindanao, triggering flash floods and landslides in areas already ravaged by typhoons last year. In the global scene, North Korea agreed to hold talks with South Korea to ease military tensions and Hollywood stood in support of the Time’s Up movement during the recently concluded Golden Globe awards.
It’s therefore not surprising that many are both anxious and hopeful as to what lies ahead for the rest of 2018. PwC’s Global Economy Watch gives us a glimpse on what we can expect.
Global economic growth
The global economy is set to grow by almost 4 percent in 2018 in purchasing power parity (PPP) terms, adding an extra $5 trillion to global output at current values, according to new Global Economy Watch projections.
The main engines of the global economy — the US, emerging Asia and the eurozone – are expected to contribute almost 70 percent of economic growth in 2018 compared to their post-2000 average of around 60 percent.
Growth in the eurozone is predicted to be above 2 percent in 2018 as PwC expects peripheral economies to outpace the core for the fifth consecutive year. Of the larger eurozone economies, the Netherlands is expected to lead the way with economic growth of around 2.5 percent. In contrast, uncertainty relating to Brexit is expected to drag on UK growth, which is predicted to be 1.4 percent in 2018.
Barret Kupelian, senior economist at PwC, comments: “In 2018, we expect global economic activity to grow at its fastest rate since at least 2011, with the three main engines of the global economy—the US, Eurozone and Asia—growing in tandem. However, there are some downside risks businesses should be monitoring including the progress of the Brexit negotiations, key elections in large economies and protectionist tendencies in some nice sectors of the economy.”
China, the world’s largest economy in PPP terms, could grow by 6-7 percent in 2018, slower than previously but in line with expectation. Eight of the 10 fastest-growing countries in 2018 could be in Africa, according to PwC’s analysis.
With the fastest level of growth for several years, 2018 is also predicted to be the most energy-hungry on record.
Almost 600 quadrillion British Thermal Units of energy could be consumed by the global economy in 2018, the highest on record and double that of 1980. India and China alone are expected to consume 30 percent of global energy.
Despite this, PwC’s outlook predicts that oil prices will remain broadly stable in real terms, with OPEC and its allies extending their 1.8 million barrels per day supply cut until the end of next year.
PwC’s Global Economy Watch cites other influences and factors to watch in 2018:
• The European Central Bank could reduce its monthly asset purchases in 2018 but a dramatic shift in monetary policy in Japan is unlikely.
• Across the G7, unemployment is predicted to hit a 40-year low at around 5 percent or 19 million workers.
• Wage growth will post a modest uptick in some advanced economies where spare capacity is limited but remain below pre-crisis levels.
• An extra 80 million people are likely to be added to the world’s population in 2018 but as a percentage increase this would be the slowest since 1950. For every 10 people added to the world’s population, PwC predicts nine will be located in either Africa or Asia.
The Philippines in 2018
Despite political uncertainties, the Philippines continues to be one of the fastest-growing economies in Asia. According to Global Economy Watch, among the 17 economies that will grow faster than China are India, Ghana, Ethiopia and the Philippines. This is somewhat consistent with the growth forecast for the country as noted in the supplement to the Asian Development Outlook published by the Asian Development Bank (ADB) in December 2017. The ADB raised its 2018 GDP growth forecast for the Philippines to 6.7 percent from the previous estimate of 6.5 percent.
Given our current reality and where we want to head, however, business leaders have to take a more active role in pushing not only the growth of their businesses but that of the country as well. Whether or not 2018 will live up to its promise of being generally a good year — at least on the economic front — is something we should all look forward to with cautious optimism. As for me, my earnest hope for our country for 2018 and the years ahead is one that goes beyond any number or statistic: That we emerge as a more united nation and people as we work towards becoming a major global economic player.
(Global Economy Watch is a short publication that looks at the trends and issues that are affecting the global economy and details latest projections for the leading economies of the world. It is presented by PwC’s Macroeconomics team. To download the latest issue, visit www.pwc.com/gew.)
Catherine H. Santos is an assurance partner and assurance transformation partner of Isla Lipana & Co., a member firm of the PwC network. For more information, please email firstname.lastname@example.org. This content is for general information purposes only and should not be used as a substitute for consultation with professional advisors.