World economy set for growth in 2017, but deficit still a problem

By on February 3, 2017

ING economist sees PHL '16 GDP at 6.8%, '17 at 6.2%  (Photo by Allan Ajifo [CC BY 2.0)
ING economist sees PHL ’16 GDP at 6.8%, ’17 at 6.2% (Photo by Allan Ajifo [CC BY 2.0)
MADRID—The world economy is set to maintain a solid level of growth in 2017, but the deficit will continue to be a problem, according to the ESADE 2017 Economy Report published on Thursday by the business school and Banco Sabadell.

The report, which also looks at the possible effects of Brexit and the election of Donald Trump as U.S. president, predicts higher growth in developing nations, which can expect to see their economies expand by an average of 4.5 percent.

India is expected to see a 7-percent growth, and a 6.5-percent growth is predicted for China in the coming years.

Meanwhile, developed nations can expect their economies to expand by slightly under 2.0 percent, with the United States predicted to grow slightly over 2.0 percent and Britain, somewhere just below that figure.

Brazil and Russia can also hope for an upturn in fortunes after some difficult years.

Spain will see its economy continue to expand at around 2.0 percent, slightly below the growth witnessed in 2016.

While in Latin America, Peru, Bolivia and Colombia can await expansion of between 3.0 and 4.0 percent, with Chile and Mexico slightly below at 3.0 percent.

ESADE believed the U.S. economy would see short-term growth due to tax cuts and increased spending in construction, infrastructure and the military.

This effect, however, will probably be diluted by increasing interest rates and a higher public debt.

Similar short-term benefits from Brexit could also be expected, due to the falling level of the British pound.

But ESADE warned governments “should also look at the protection of some vulnerable groups to counteract the effects of the crisis over inequality” and recommended increased spending on research and development, health, and education.

Finally, ESADE predicted a “neutral” fiscal policy between 2017 and 2018 with the level of public debt slowly falling to a level of 87 percent of gross domestic product (GDP), as opposed to the 90.3 percent in 2013.

This should be possible as the result of falling interest rates, although the debt levels of some nations will limit their fiscal policies.