2017 Outlook: What’s next for the global economy?

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16 December 2016

Video transcript of "What’s next for the global economy?":

What is the economic outlook for 2017 and beyond?

2017 will be a good year, with growth accelerating globally. That being said, there will be differences depending on the region.
Where does growth accelerate? Mainly in the US, where it's going up beyond 2%. It's also accelerating in Japan thanks to a very active policy support.
Where is it stabilizing? In Europe, as usual, where we have a mix, a combination, of monetary and fiscal policy and some electoral risk. Where we are seeing risk is mostly in emerging markets, partly because of the dollar appreciation.

Are higher interest rates back for good?

The question of rate rising is a fundamental one for next year for investors. It's all the more interesting that most people seem to have a truncated view of where rates are going. In the short term, rates have been propelled because of the US election. But we believe that there are more fundamental forces supporting a sustainable rate rise across the world. This has to do with the central bank.
Since last summer, all central banks have started withdrawing from the ever-more accommodative monetary policy. This is true for the Fed. It's true for the ECB. It's also true with respect to the Bank of Japan. It is this progressive withdrawal, which will insure that the rate increase is actually sustainable.

Could the upcoming European elections be the next black swan?

A lot of investors have been wondering whether Europe could be the next black swan. I actually don't believe so. I think people are often confusing one common trend across Brexit, Trump and the Italian Referendum, and a more specific national feature.
The Brexit is different from Trump's election because in the U.K. the elite, or part of the elite, voted to exit the EU. In Trump, in the US, for Trump, there was no elite vote. In Italy, it was a rejection of the current leader and its reform program.
The main risk could be France, but I believe this has changed as well. In the run-up to the French election, we will now have a whole set of new candidates, and the fact that we are not replaying 2012, that they are new faces, the fact that in France, the far right has been there for a long time and is not a new joiner, as Trump was, sets a completely different stage.
I think the French election will be a lot more standard than what people have in mind. As we know in Germany as well, even if Merkel is not re-elected, all together, there are few electoral risks in 2017 across Europe.

Is technology actually “everywhere but in the data”?

The question about digital and growth reminds me of the question about information and communication technology and growth, like we saw in the 90s. At the time, everybody was saying, "Oh, we can see ICT everywhere but in the data." Yet, in 2000, there was the dot-com bubble. We're all using internet. We're all using smartphones.
The ICT has diffused through and increased GDP growth substantially, at the time. It had boosted the US growth by close to one percentage point, and European growth by close to half a percentage point. At the current level, that would be a significant boost if we had the same phenomenon today.
We are in the early stage of the digital revolution. We have barely seen any effect, other than on the micro level. I believe, looking forward over a five to ten year horizon, we could see the same revolution as we had for ICT.
Video published: 16 December 2016


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