While the global economic upswing, underway since the second half of 2016, is continuing to strengthen, US policy uncertainty and a potential trade war could quickly darken the current bright skies, said a new report.

Global GDP growth is forecast to accelerate to 3.2 per cent in 2018, the strongest annual expansion since 2011, added the report titled “Global Economic Outlook - May 2018” from Atradius, a world leader in credit insurance, surety and debt collection.

Growth is expected to remain strong in 2019 but moderate slightly to 3.0 per cent, according to the report.

The US economy is outpacing other advanced markets, with growth set to expand 2.8 per cent this year before easing to 2.4 per cent in 2019. After a very strong year, the Eurozone economy is forecast to expand a solid 2.2 per cent this year before easing further to 1.8 per cent in 2019. Growth is also easing in Japan while it stays resilient in the UK.

GDP growth across emerging market economies as a whole is picking up strongly. Latin America is set to see the strongest acceleration, to 2.0 per cent in 2018 and 2.9 per cent in 2019. Eastern Europe is expected to see some momentum easing from 3.0 per cent this year to 2.5 per cent next year.

Emerging Asia will continue to enjoy the strongest growth, but a gradual slowdown in China is forecast to increasingly drag on regional growth, bringing it down to the still respectable 5.8 per cent in 2018 and 5.5 per cent in 2019.

The global upswing has translated in further improvements in the insolvency environment. After a 4 per cent decline in corporate failures across advanced markets in 2017, Atradius forecasts a further 3 per cent decline this year. Insolvencies are also on a downward trend in key emerging markets.

Global growth is increasingly broad-based, with recoveries in trade and investment underway, as well as oil and commodity prices. “We highlight the significant increase in the risk of a trade war. However, there are also positive developments on trade that should not be ignored: at the global level, more policies are implemented to facilitate than to restrict trade and some countries are now accelerating trade liberalisation negotiations,” the report said.

Naturally, US protectionism now tops the list of risks to the global economic outlook’s bright sky, Atradius said.

The second highest risk we identify also stems from the world’s largest economy: misguided Fed policy. The remaining risks are a hard landing in China, a financial market correction, heightened geopolitical risk and oil price volatility.

The US outlook is revised up from the previous Outlook, as a loosened fiscal policy adds fuel to the economy that was already going strongly. The fiscal stimulus could increase the risk of misguided Fed policy and will reduce the policy tools to combat the next downturn in the US. Policymaking uncertainty, especially related to trade, may bring on that downturn more quickly than expected.

The Eurozone will continue to enjoy loose monetary policy and tightening labour markets but some momentum will ease as export growth slows. The UK is expected to remain resilient while Advanced Asia loses some momentum alongside slowing Chinese growth.

China’s dominance in Asia and extensive investment activities across emerging markets, especially in Sub-Saharan Africa and Asia, are also causing more opposition and a possible threat to debt sustainability in some emerging market economies (EMEs).

The bright sky foreseen for the global economy in 2018 is further reflected by the modestly positive insolvency outlook. A 3 per cent decline is forecast in aggregate corporate bankruptcies across advanced markets this year. The UK is the only real exception to the positive outlook.

In Advanced Asia, Japan’s insolvencies are expected to stabilise at historically low levels while corporate failures in other markets decrease strongly despite rising headwinds from China. Steady declines are also forecast for key emerging markets with available data – especially in Brazil as it bounces back from a deep recession. – TradeArabia News Service