International outlook for 2018.

• Author: Bonser-Neal, Cathy

In 2018, the world is definitely expected to be moving on from three successive shocks:

* The financial crisis of 2007-2009

* The eurozone crisis of 2009-2013

* The commodity price crash of 2014-2016

As these extraordinary shocks have faded, confidence has returned, particularly regarding consumer and business optimism. In 2018, for the first time since 2008, virtually no country is expected to experience a recession and the growth rebound of 2017 is forecasted to continue (albeit not as strongly as 2017 for everyone).

Based on International Monetary Fund (IMF) forecasts, global real GDP in 2018 is expected to increase by 3.7 percent. This estimated growth performance is marginally better than the robust 3.6 percent global growth of 2017. The growth is generalized to advanced, emerging and developing economies, and it is better than the historical average for this decade (see Figure 1). The global growth outlook is finally back to the long-term average of the past 30 years, and as a result, the global spare resources (such as unemployment and excess capital) are no longer increasing.

Europe

Growth is taking root for the 28 members of the European Union (EU28) and after a growth of 2.3 percent in 2017, the EU28 is expected to grow by 2.1 percent in 2018. Industrial production, household consumption, business investment and exports have rebounded across the EU28, returning to growth rates that would be considered more normal in a period of sustained economic expansion. Those rates should persist in 2018. Unemployment has also receded to its lowest level since November 2008, and this declining trend should persist throughout 2018. The lowest EU unemployment rate was observed in the Czech Republic at 2.9 percent, and the average rate across the union is highest in Greece at 21.2 percent.

The turnaround in the eurozone economy may best be illustrated by the growth performance of countries such as Portugal, Greece and Italy--who after years of painful austerity measures and difficult labor market reforms have seen a boost in their growth, particularly thanks to their exports. This strong performance in the peripheral countries occurred despite a resurgent euro that could have resulted in depressed exports. Furthermore, the recovery in the periphery appears to be more self-sustainable and less in need of public sector support.

Germany, the region's largest economy, is expected to grow by 1.8 percent in 2018. This continued strong performance is due to the general improvement in the global economy that is stimulating German exports. It can also be traced back to its competitive labor market and investment in the private sector.

On the other hand, the notable exception to this improving European...