PwC economists reveal predictions for 2017, as globalisation takes a back seat
- US will drive growth in the G7
- Core Eurozone employment to hit all-time high, but periphery will create more jobs
- Indonesia set to become world’s 16th trillion dollar economy
- Population growth to put pressure on Gulf countries to reform public finances
- In our main scenario, we expect the US to grow by around 2% - the fastest in the G7 - on the back of strong job creation and household consumption. It could surprise on the upside if the new administration lowers taxes and pursues plans to boost spending on infrastructure. Our analysis suggests the US will contribute around 70% to G7 growth in our main scenario, despite making up half of G7 GDP in absolute terms.
- Core Eurozone employment will hit an all-time high but periphery will create more jobs
We expect the ‘peripheral’ economies to grow faster than the ‘core’ for the fourth consecutive year. Irish GDP growth is expected to be the leader of the peripheral pack, expanding by more than 3% per annum, while France and the Netherlands will lead the core, growing at a rate of 1.5%. On the jobs front, employment in the core is expected to hit an all-time high of around 97 million. But this will be outperformed by the periphery, which will create around 100,000 more jobs than the core.
- Indonesia is set to become the world’s 16th trillion dollar economy
Asia will remain the fastest growing region of the world, but the spotlight will shift away from China to India and Indonesia. We think Indonesia is on course to join the elite ‘trillion dollar’ economy club this year. In comparison, we project Chinese growth to remain at around the 6% mark. India’s contribution to world GDP growth could reach almost 17% this year. China’s growth may be slowing, but if it manages to grow at 6.5% per year, it will add an economy the size of ‘Turkey’ to global output. We think Brazil and Russia will start growing again on an annual basis by 0.5% and 1% respectively, aided by a rise—albeit small—in commodity prices.
- Population growth will put pressure on the Gulf (GCC) countries to reform public finances
In 2017, Saudi Arabia is projected to add two ‘Icelands’ to its working age population. The other GCC countries are also expected to see strong growth of around 2% in their labour force. The challenge facing the GCC economies is to create employment opportunities while reforming public finances. In these economies, falling oil prices over the past few years have seen a deterioration in government finances e.g. from a government budget surplus in 2013, to an expected net public debt stock of 10% of GDP by the end of this year. Diversifying the economy towards the private sector will lessen the burden on government finances, as well as creating new jobs for a growing workforce
- The peripheral Eurozone economies would outpace core growth at 2% compared to 1.5%. In 2016, the periphery is expected to have grown by 2.2% and the core by 1.4%;
- Total unemployment in the Eurozone would fall to below 17 million, its annual lowest levels since 2011. Preliminary data suggest unemployment is almost at 16 million; and
- India would lead E7 growth at over 7.5%, while Chinese growth would slow to around 6.5% per annum. Last year, India is expected to have grown by 7.6% and China by 6.6%.
Mike DaviesDirector, Global CommunicationsUnited Kingdommike.firstname.lastname@example.org+44 20 7804 2378+44 7803 974 136
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