The International Monetary Fund (IMF), in its latest World Economic Outlook report released in October, raised its global growth forecast for 2017 and 2018 by 0.1 percentage point relative to its April report. Global growth is now projected to expand 3.6% in 2017 and 3.7% in 2018, a slight upgrade from the previous estimates of 3.5% and 3.6% respectively. It attributed the faster pace of global economic recovery to the notable pickups in investment, trade, and industrial production, as well as the strengthening business and consumer confidence.
In advanced economies, IMF noted that the ongoing cyclical recovery has been stronger than previously predicted. Thus, it has revised upward their projected growth rate for 2017 from 2% to 2.2% while maintaining the 2018 forecast unchanged at 2.0%.
Growth in emerging market and developing economies is forecast to continue to increase strongly, from 4.3% in 2016 to 4.6% in 2017 and 4.9% in 2018, a 0.1 percentage increase for 2017 and 2018 relative to the April forecast. China is expected to post a stronger growth rate of 6.8% in 2017 (6.6% in the April forecast), due to the stronger-than-expected output growth in the first half of the year. Its growth rate for 2018, though projected to slow down to 6.5%, is, nevertheless, still 0.3 percentage point higher than the earlier forecast, on the expectation that the Chinese authorities will continue to maintain a sufficiently expansionary policy mix.
Growth projection for India for 2017, on the other hand, has been revised down to 6.7% (7.2% in April), reflecting the lingering disruptive effects of the currency exchange initiative and the transition costs associated with the introduction of the national Goods and Services Tax. India’s growth rate is expected to pick up to 7.4% in 2018, which, nevertheless, is down 0.3 percentage point from the April projection of 7.7%.
For ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam), IMF has predicated a stronger growth rate of 5.2% in 2017 (as against the earlier projection of 5.0%) partly due to the stronger-than-expected external demand from China and Europe. IMF, however, maintained its 2018 output growth projection for the grouping at 5.2%.
Going forward, IMF listed minimising the risk of a sharp slowdown in China, guarding against a build-up of financial stability risks in a global environment of easy finance and monitoring the risks from volatility as the central banks in the advanced economies gradually withdraw stimulus as the key challenges to global economic growth.
The World Steel Association (worldsteel), which released its Short-Range Outlook (SRO) in the same month of October, also painted a more upbeat picture of the global steel market with global finished steel demand projected to grow by 7% year-on-year to 1,622.10 million tonnes in 2017, followed by a moderate rise of 1.6% to 1,648.10 million tonnes in 2018.
China’s steel demand is expected to register a surprisingly high growth rate of 12.4% year-on-year to 765.7 million tonnes in 2017. However, this surge is mainly due to the closure of the country’s outdated induction furnaces in the year, which was generally not captured previously in official statistics. With the closure of the induction furnaces, the demand from this sector of the market is now satisfied by mainstream steel makers and therefore captured in the official statistics in 2017. Disregarding this statistical base
effect, worldsteel expects the underlying growth rate of China’s steel demand will be 3% this year, which will also bring the corresponding global growth rate to 2.8%. However, the outlook for China’s steel demand in 2018 will be subdued, with no growth over 2017, at 765.7 million tonnes.
For the other emerging Asian economies, India is expected to register a growth rate of 4.3% in steel demand in 2017 to 87.1 million tonnes and expand by a further 5.7% in 2018 to 92.1 million tonnes. worldsteel expects India government’s accelerating reforms to bring about a better investment environment leading to growth in the coming years.
For ASEAN, worldsteel expects it to remain a high growth region. Steel demand in ASEAN-5 is projected to expand 4.8% in 2017 to 77.7 million tonnes and accelerate by 6.8% in 2018 to 83.0 million tonnes. Of significance is the expected entry of Vietnam into the list of top 10 steel consuming countries in the world in 2018, at the 10th position, with annual consumption of 27.0 million tonnes.
For the developed economies, steel demand in the USA is expected to increase by 4.8% this year to 96.2 million tonnes and by 1.1% in 2018 to 97.3 million tonnes. The EU-28 is also expected to see its steel demand growing by 2.5% this year to 162.1 million tonnes, and up 1.4% in 2018 to 164.3 million tonnes. In the case of Japan and South Korea, the two countries’ steel demand growth is expected to remain subdued, with Japan registering a growth rate of 2.9% in 2017 to 64.0 million tonnes before falling to a growth rate of only 0.8% in 2018 to 64.5 million tonnes while South Korea’s steel demand is expected to contract by 1.5% to 56.2 million tonnes in 2017 and improve marginally by 0.4% to 56.5 million tonnes in 2018.
Looking ahead, worldsteel mentioned escalating geopolitical tension in the Korean peninsula, China’s debt problem and rising protectionism in many parts of the world as the main risks to global growth.
TAN AH YONG