The Global Economic Landscape Shows a Surprise Turn Towards Optimism

The world is yet to recover fully from the aftereffects of the 2007/2008 global financial meltdown even as the 10th year anniversary of the infamous recession comes around. Equities have risen from the ashes to help investors recoup much of the losses suffered in that meltdown. Interestingly, policy makers are tacitly leaning towards easy money policies in order to avoid rocking the economic boat of their countries.

In addition, many policymakers are adopting protectionist tendencies in response to the widespread clamor for populism as evident in Donald Trump's victory and the jarring Brexit vote. This piece provides insight into the short-term prospects of the global economic landscape.

The global geopolitical landscape is enmeshed in turmoil; yet, political commentators believe that the relative piece in the world right now might akin to the calm before the storm. To start with, the undercurrents of tensions between the United States and North Korea are still going on strong.

North Korea's Kim Jong Un has maintained that he needed to build nuclear weapons as a means of ensuring the sovereignty and survival of his country. In his words, the missiles “are a precious fruition borne by its people’s bloody struggle for defending the destiny and sovereignty of the country from the protracted nuclear threats of the U.S. imperialists.”

U.S. President Donald Trump however is intent on forcing North Korea to drop its nuclear armament plans, and he is not sparing words in expressing his intent. The U.S. has gotten more than 20 countries to wind down business and diplomatic relations with North Korea in order to mount pressure where it hurts—on the economy. Trump has also posted tweets noting that policy hasn't worked in getting North Korea to be reasonable in the last 25 years. He notes that "only one thing will work" in getting Pyongyang to drop its nuclear plans.

The IMF thinks the global economy is on bullish flight

The pages of newspapers both digital and print are filled with lots of scary headlines that might want to tempt investors to stay on the sidelines. Yet, the International Monetary Fund is optimistic about the prospects of the global economic landscape in the rest of 2017 and in 2018. The IMF in its renowned report, the World Economic Outlook observed that the global economic landscape is building up a spur of bullish momentum that hasn’t been recorded in the last couple of years.

The IMF has increased its growth forecast for 2017 to indicate a 3.6% economic growth up from the 3.2% growth recorded in 2016. The IMF also expects the global economy to grow by 3.7% in 2018 up from the previous forecast of 3.6%. IMF’s chief economist, Maurice Obstfeld observes that “The current global acceleration is also notable because it is broad-based—more so than at any time since the start of this decade.”

Tony Yates, an analyst at Weiss Finance observes that "2017 is already shaping up to be the year that the global economy ended the year on a strong economic notes – within the last decade, the strong economic outlooks of each usually end up being reviewed downwards as the months fly by". However, the economic recovery seems to be in all the major world economies including China, U.S. and the Eurozone.

Interestingly, the IMF thinks that economic policy makers should be proactive in taking advantage of the bullish sentiments to set their countries on a faster path to growth. In the words of Obstfeld, “policy makers should seize the moment: the recovery is still incomplete in important respects, and the window for action the current cyclical upswing offers will not be open forever.”