Economic growth in Germany slowed over the course of the reporting year. According to initial calculations by the German Federal Statistical Office, gross domestic product (GDP) increased by 1.5% in 2018 compared with 2017 when adjusted for prices, after 2.2% in each of the two preceding years. This fell considerably short of the forecast of 2.3% issued by the International Monetary Fund (IMF) in January 2018. The decline in growth was attributable to lower-than-expected increases in consumer and public spending and a slightly lower positive contribution from foreign trade in comparison to the previous year.
According to the latest figures from the statistical agency Eurostat, the eurozone economy achieved GDP growth of 1.8% in 2018 and thus likewise fell short of the IMF forecast of 2.2% from January 2018. In addition to lower growth in Germany, the rate of expansion in the major economies of France, Italy and Spain also slowed. All in all, consumer and public spending was lower than expected. Economic development was still boosted by the monetary policy of the European Central Bank (ECB), which continued to adhere to its expansionary measures in the reporting year. It terminated its bond-buying program at the end of 2018 as announced.
The U.S. economy picked up momentum during 2018 and is expected to have achieved GDP growth of 2.9%, slightly exceeding the IMF’s forecast of 2.7% from January 2018. This was due chiefly to an increase in private investment and higher government spending. In each of the months March, June, September and December 2018, the U.S. Federal Reserve (Fed) increased its key interest rate by 25 basis points.
After reaching 1.9% in the previous year, Japan’s economic growth fell to 0.9% in 2018 according to the IMF, despite the continuing expansionary monetary policy of the Japanese central bank. At the start of the year, the IMF had forecast a rise of 1.2%. Growth in consumer spending slowed considerably and the foreign trade surplus also increased only slightly. An increase in public spending and higher private investment only partly compensated for these effects.
According to the IMF’s World Economic Outlook (WEO) Update from January 2019, emerging and developing economies achieved growth totaling 4.6% in 2018 (PY: 4.7%). At the start of the reporting year, the IMF had forecast an increase of 4.9%. China and India were the main growth drivers once again. However, growth in the Chinese economy slowed slightly, as expected by the IMF at the beginning of 2018, to 6.6% (PY: 6.9%). With GDP growth of 7.3%, India developed almost to the extent estimated by the IMF with its forecast of 7.4%. Russia grew by 1.7%, as the IMF had anticipated. With a 1.3% increase in GDP, Brazil fell short of the forecast growth of 1.9%. In addition, growth in some African countries and in the Middle East was lower than expected at the start of the year as a result of lower revenue from raw material exports.
The IMF’s January 2019 WEO Update indicates that the global economy grew by 3.7% in 2018 after 3.8% in the previous year. As a result of the slowdown in many countries over the course of the year, the IMF’s forecast of 3.9% growth from January 2018 was not achieved.
Year-on-year economic growth (GDP) in 2018
Sources: IMF – World Economic Outlook Update January 2019, Eurostat, statistical offices of the respective countries, Bloomberg.
