This year marks the fourth year of recovery for the eurozone economy but the region appears to still be hampered by slow growth, high unemployment, low core inflation and negative interest rates.
The European central Bank is expected to continue with its policy of generous monetary accommodation as there is little evidence of a sustainable pickup in core inflation and wage pressures.
Emerging market growth is expected to accelerate this year to around 4.75 per cent. A further slowdown in China is expected with GDP growth of 6.5 per cent.
A large part of China’s economic vibrancy is now coming from the services industries and domestic consumption instead of low-level manufacturing and investment. Elsewhere, Russia and Brazil emerge from recession and India adjusts to demonetisation.
Despite an improved outlook for growth, emerging market economies may still face challenges in 2017.
In 2017, we expect to see the Australian economy to almost completely shake off the drag from the wind-back in mining investment.
Non-mining business investment is likely to grow modestly although housing construction is likely to level off after a period of strong growth. Export growth is set to remain solid as LNG export capacity comes on stream and services exports continue to benefit from the lower Australian dollar and rising household incomes in China.
Inflation is expected to remain well below the Reserve Bank of Australia’s 2 to 3 per cent target which should keep the cash rate on hold at the record low of 1.5 per cent.
The global economy has entered 2017 with the headwinds from the 2015-16 slowdown and price deflation falling away. All regions have lifted and a synchronised upswing is emerging – even if the stage of the business cycle varies widely between countries.
Mark Rider is Head of Investment Strategy and Portfolio Management at ANZ and will take over as Chief Investment Officer for ANZ Wealth Australia effective March 10 2017.