According to Moody’s Investors Service rating agency, the US economy is expected to lead global growth during the next two years
If the recent president elected Donald Trump respects his plan of cutting taxes and focusing on American infrastructure, the US will be the country with the fastest growing economy, with a 2.2% rate in 2017 and 2.1% rate in 2018.
“While prolonged policy uncertainty could weigh on already weak investment growth, there could be an upside to growth from increased fiscal expenditure, especially infrastructure spending, and tax cuts,” commented the agency’s associate managing director, Elena Duggar.
Nevertheless, the soon to come elections in the EU countries could affect global economy for the worst, in Duggar’s opinion.
“With the unanticipated outcomes of the Brexit Vote in the UK and the US presidential election, it has become evident that nationalistic and anti-globalisation sentiments are gaining traction globally. Going forward, there is likely to be an increased tendency toward protectionist economic policies in advanced economies.The risk of rising political discord and an increase in EU fragmentation has increased,” she further explained.
On the other hand, uncertainty regarding business investment will be balanced by the monetary policy accommodation, in the opinion of the managing director.
“There is a high degree of uncertainty surrounding the UK’s economic outlook, since it depends on the ultimate outcome of a multi-year trade negotiation process with the EU, and other economies. Our baseline growth scenario for the UK assumes that it would be able to negotiate a free trade agreement with the EU. However, a failure to negotiate could substantially worsen sentiment, triggering a material correction in asset prices, a house price downturn, and more substantial declines in investment and consumption spending. The rise in protectionist discourse globally could also prove to be a hurdle for the UK, and challenge long-term prospects,” she concluded.
