By Conor Lambe, Chief Economist at Danske Bank
2018 is shaping up to be a good year for the global economy. It is currently experiencing an upswing in performance and in their latest forecasts, published at the beginning of the year, both the IMF and the World Bank projected that global GDP would grow at a slightly faster pace this year than in 2017.
What makes this global pickup particularly welcome is that it is broad based with all the major economies of the world growing.
In the US, real GDP grew by a faster rate in 2017 than it did in the previous year. And the tax reforms passed by the Government at the end of last year are expected to support economic activity in the short-term.
The European economy also had a good year in 2017. Both the whole of the European Union and the euro area (the 19 countries that use the euro) grew by 2.5 per cent, the fastest pace of growth in a decade. The latest monthly data also shows that the unemployment rate in the euro area is now at its lowest level since the start of 2009.
In the emerging markets, the Chinese economy grew by 6.9 per cent in 2017 and growth is expected to remain above 6 per cent over the next couple of years. The IMF and World Bank are forecasting growth of above 7 per cent in India this year. After experiencing falling output in 2015 and 2016, Brazil and Russia are also growing again.
This relatively strong economic performance across the globe is supporting world trade. According to data published by the CPB Netherlands Bureau for Economic Policy Analysis, the volume of global goods trade increased by 0.6 per cent over the three months to November 2017.
Closer to home, export success was one of the positives in 2017. In Northern Ireland and the rest of the UK, exporting businesses have been able to benefit from the strong global economy and the depreciation of sterling that has made UK goods more price competitive in global markets.
The latest data shows that to the year ending 2017 Q3, Northern Ireland’s top five export partners for goods were the Republic of Ireland, the US, Canada, France and Germany and it was encouraging to see the value of exports going to each of these countries increase.
There were also increases in the value of exports of each of Northern Ireland’s top five export commodities – machinery & transport equipment, chemicals & related products, miscellaneous manufactured articles, food & live animals and manufactured goods classified chiefly by material.
International trade is not without its challenges and there are a few on the horizon. Local businesses still face a lack of clarity around what the UK’s long-term trading relationship with the European Union will look like after Brexit, and at the time of writing, we still have not secured a transition period to come into force once the UK leaves the EU next year.
Businesses will also need to keep a close eye on currency movements – the weak pound has strengthened export demand over the past year, but added to buying pressures for importers.
But with 2018 set to be a good year for global GDP growth, there could be more opportunities for local exporters this year.
This article was published in the March/April edition of Ambition
