SINGAPORE (Dec 25): The stage is set for sustained solid growth in the world economy next year. We expect global growth of 3.2%, matching the growth rate this year.

1. The US economy will sustain above-trend growth. With the strong momentum at the end of the year, we expect growth in 2018 to be 2.6%, above the 2.3% in 2017.

2. Europe’s expansion will slow a little, but remain solid. Real GDP growth of the Eurozone is expected to be 2.4% this year — the strongest since 2007. Most of the factors that helped growth this year will also support growth in 2018.

3. Japan’s growth spurt will fade. While the economy will continue to grow in 2018, the momentum will ease relative to 2017.

4. China’s momentum will weaken. The fundamental problems, such as excess industrial capacity and debt overhang, have remained unresolved.

5. The improved performance of the emerging world will be sustained. With growth in the developed world picking up, emerging market growth rebounded to 4.8% in 2017.

6. With the rally over, commodity prices will be range-bound and volatile. After surging around 44% in 2016, our IHS Markit Materials Price Index rose 17% in 2017. We see no big increases in 2018, and potentially a lot of volatility.

7. Upward pressures on inflation will remain muted. Recent evidence shows a gradual increase in developed-economy inflation rates as output gaps continue to close, and as the disinflationary impacts of falling commodity prices dissipate.

8. The Fed will keep raising interest rates — some other central banks may follow. After the mid-December rate increase, the US Federal Reserve is on track to hike interest rates another three times in 2018.

9. The US dollar will be pushed up a little more — although depending on political developments, volatility could also remain high.

10. With global growth momentum strengthening, and assuming no policy mistakes or “black swans”, the risks of a recession remain low. — IHS Markit

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