- Rising inflation and interest rates will pave the way for faster growth, except in Europe
- Europe’s growth path hinges on French elections and Italy’s political and banking crisis
- A reformist Francois Fillon presidency in France and Italy’s potential exit from the euro could remake the EU
The world economy in 2017 will be characterized by four major features. First, growth will remain fairly stable. That suggests expansion in the United States will not amount to much more than 2 percent. The European Union will continue to suffer from shaky public finances in key countries and from sluggish growth in the eurozone as a whole. China will avoid a dramatic slowdown, but its economic performance will be disappointing compared with the past. The only bright spot could be Russia, which might pull out of the recession it has experienced over the past two years.
Second, after the wide swings shown in 2015 and 2016, oil prices will stabilize at between $50 and $60 per barrel, as predicted in previous reports. Certainly, bouts of volatility can be expected, since energy prices remain sensitive to changes in the geopolitical climate. Among the variables are U.S. President-elect Donald Trump, whose pro-drilling attitude may trigger a surge in American oil output, and OPEC’s ability to enforce a credible production cap, both between its members and among major producers outside the cartel, including Russia. Nevertheless, any price swings outside the $50-$60 range are likely to be temporary.