The Global Economy and the Euro Area: So Far Trade Disputes Have Had Only Limited Effects on Global Growth: DIW Economic Outlook

Abstract

After a strong second quarter, the global upturn appears to remain intact, economic and political turmoils notwithstanding, especially in the United States and the euro area. Therefore, DIW Berlin is slightly raising its forecast for the global economy this year to 4.2 percent. Over the course of the rest of the year, however, non-recurring effects are likely to disappear in the United States, causing growth to slow down somewhat. Thus, for the coming year, DIW Berlin is remaining with its forecast from early summer, which estimated growth of 3.9 percent. Due to the improving labor markets, private consumption continues to be the most important support of the upturn in the global economy. Monetary policy remains expansionary for the time being but this will gradually change. Uncertainties regarding US trade policy are a risk to global trade, which will likely dampen investment in the further course of the forecast period. Further risk factors are the economic policies of the new Italian government and the threat of a hard Brexit. The turbulence in Turkey, on the other hand, is unlikely to have a major impact.