— December 18, 2017
Geopolitical threats and a growing debt burden threaten to overshadow the global economy in 2018. But, despite a sense of disquiet in some quarters, many analysts believe that there is much to look forward to in the next twelve months. Clemens Fuest from the IFO at Munich University certainly has no concerns about the year ahead:
“The data we get and the indicators we see are very positive, there is no obvious obstacle,” he said.
Predicted Economic Growth for 2018
Global economic growth is predicted to be 3.5%. The US economy is expected to grow by 2.5%, China 6.4%, and Australia 2.75%. The UK, on the other hand, is paying the price of unproductive Brexit negotiations. Following four strong years of economic growth, the UK economy is now slowing down. Economic growth is a paltry 1.6% this year and the OECD forecasts GDP growth of only 1% in 2018. This is significantly weaker than the rest of the G4 nations.
With such a diverse picture of global economic growth, it is hard for businesses to prepare. There are still worrying pockets of geopolitical volatility, which continue to impact on economic growth worldwide. In the US, President Trump’s presidency lurches from one ill-thought-out tweet to the next, while in the war-torn regions of Syria and Iraq, Islamic State is largely vanquished, but not quite dead. Meanwhile, in North Korea, Kim Jong Un seems determined to start WW3.
In many ways, there is a sense of the “calm before the storm”. 2017 has been a very quiet year for the financial markets, and by extension, global businesses. The markets have been calm for some time now, buoyed up by global economic growth and low-interest rates. with very few major hiccups, but Morgan Stanley’s equity analysts are predicting more volatility in 2018.
In a recent report published by leading trading platform, IG, Australian IG traders looked at how major events affected market volatility in 2016 – and what lessons could be learned. They discovered that new markets represented untapped opportunities and younger traders were more comfortable with volatility. This proves that volatility needn’t kill productivity or profits.
Businesses can learn from this approach. Unfortunately, there is an overriding temptation to sit tight and pretend everything is OK. Experts say businesses should have contingency plans in place to prepare for the fallout of worst-case scenarios.
Using Brexit as an example, UK businesses don’t yet know what will happen when the UK finally leaves the EU, apart from the fact there will be a very hefty £50 billion divorce settlement. Now would be a good time to stress test supply chains and reduce exposure to volatility. Businesses leaders must pay close attention to the political climate, so they are in a better position to predict what might happen.
Businesses must protect their assets and reputation. All it takes is one disastrous public comment in a time of crisis and a company’s reputation is irrevocably damaged, as BP’s chairman found out following the Deepwater Horizon oil spill in the Gulf of Mexico when he described those affected as “small people”. That and further PR errors cost BP $ 50 million.
An effective crisis management plan is essential if your business is to survive volatility in 2018. Plan for international turmoil and make sure your online assets are protected from an increasingly prevalent cyber threat.