Global economy to expand 3.4% this year, says BMI Research

The global economy is expected to grow 3.4 per cent this year and taper to 3.2 per cent next year, with the US powering ahead, but a stronger dollar and American monetary policy tightening present risks to some emerging markets, according to a report from BMI Research.

“It is becoming clearer as 2018 progresses that there are a series of key divergences emerging in economic trajectories,” said the report.

“One of those is between the US and the rest of the developed world, and the other is between emerging markets with strong macro fundamentals and those EMs that are vulnerable to changing global financial conditions.”

The United States is growing faster than other developed markets, particularly Japan and the eurozone.

US gross domestic product is projected to accelerate to 2.7 per cent this year from 2.3 per cent last year, while eurozone growth will decelerate to 2 per cent this year from 2.4 per cent last year, and Japan's economy is forecast to decline to 1.2 per cent from 1.7 per cent.

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BMI is more bearish than the International Monetary Fund, which maintained in April its forecast of global growth of 3.9 per cent for 2018 and next year, but warned of economic repercussions of trade wars between the US and China.

In emerging markets, a stronger dollar sparked by expansionary fiscal policy is wreaking havoc, and the surge in the benchmark 10-year US Treasury note yield broke through the 3 per cent level to a seven-year high. The greenback has surged more than 5 per cent since mid-April, its biggest rally since late 2015.

“The combination of a stronger dollar and higher Treasury yields has put pressure on emerging markets, highlighted by large sell-offs in the Argentine peso, Brazilian real, and Turkish lira, as well as a major deterioration in hard-currency bond spreads,” said the BMI report.

“We continue to believe that while the more vulnerable emerging markets will continue to suffer in this environment, there is little evidence of indiscriminate contagion among investors across the EM space. As such, we have made no major forecast changes to our EM forecasts, and continue to expect broad-based acceleration among EMs this year.”

Higher interest rates in the US also threaten emerging markets’ growth as their currencies, bonds and stocks have plunged in April and this month.

Hardest-hit countries such as Argentina, Turkey, Russia, Brazil and Indonesia have suffered more than others because of their weak economies and high levels of political risk, BMI said.

“Should this severe ﬁnancial market weakness persist, it would start to impact the growth and inflation outlooks in these economies,” the report said. “Nonetheless, we expect that EM central bank monetary tightening will prevent a broad-based, destabilising depreciation in EM foreign exchange.”

The dollar rally has coincided also with a surge in oil prices, which touched $80 a barrel last week. BMI has upgraded its forecast of Brent crude average for this year to $73 a barrel, up from its previous estimate of $67 a barrel and $77 in 2019up from the previous estimate of $75 a barrel.

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Conflict, drought, famine

Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.

Band Aid

Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.

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Benefits of first-time home buyers' scheme

Priority access to new homes from participating developers
Discounts on sales price of off-plan units
Flexible payment plans from developers
Mortgages with better interest rates, faster approval times and reduced fees
DLD registration fee can be paid through banks or credit cards at zero interest rates

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LA LIGA FIXTURES

Thursday (All UAE kick-off times)

Sevilla v Real Betis (midnight)

Friday

Granada v Real Betis (9.30pm)

Valencia v Levante (midnight)

Saturday

Espanyol v Alaves (4pm)

Celta Vigo v Villarreal (7pm)

Leganes v Real Valladolid (9.30pm)

Mallorca v Barcelona (midnight)

Sunday

Atletic Bilbao v Atletico Madrid (4pm)

Real Madrid v Eibar (9.30pm)

Real Sociedad v Osasuna (midnight)

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Moon Music

Artist: Coldplay

Label: Parlophone/Atlantic

Number of tracks: 10

Rating: 3/5

Iftar programme at the Sheikh Mohammed Centre for Cultural Understanding

Established in 1998, the Sheikh Mohammed Centre for Cultural Understanding was created with a vision to teach residents about the traditions and customs of the UAE. Its motto is ‘open doors, open minds’. All year-round, visitors can sign up for a traditional Emirati breakfast, lunch or dinner meal, as well as a range of walking tours, including ones to sites such as the Jumeirah Mosque or Al Fahidi Historical Neighbourhood.

Every year during Ramadan, an iftar programme is rolled out. This allows guests to break their fast with the centre’s presenters, visit a nearby mosque and observe their guides while they pray. These events last for about two hours and are open to the public, or can be booked for a private event.

Until the end of Ramadan, the iftar events take place from 7pm until 9pm, from Saturday to Thursday. Advanced booking is required.

For more details, email openminds@cultures.ae or visit www.cultures.ae