The global economic environment in 2018

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The global economy kept up the pace in 2018, with both emerging and advanced economies growing at roughly the same rate as in 2017. GDP growth remained at 3.0% and is expected to reduce slightly to 2.7% in 2019.

Eurozone growth was reasonable at 1.9%, mainly driven by domestic demand. Employment rates strengthened further, wages rose, and the unemployment rate fell to 7.9% in November 2018, compared to 8.6% at the start of the year. Although all member states’ economies grew, Eurozone growth continued to be distributed unevenly. Southern European states lagged behind, but Spain and Portugal performed much better than Italy and Greece.

Borrowing in the Eurozone continued to recover, with banks relaxing their credit conditions. Lending remained lower in Southern Europe, as banks coped with continuing weak balance sheets and high levels of non-performing loans.

'Global insolvencies continued to decline in 2018, in line with the economic cycle'
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In the US, GDP growth accelerated to 2.9%. Private consumption, which accounts for more than twothirds of the US economy, remained strong. Labour market conditions continued to improve, with the unemployment rate reaching 3.9% in December 2018.

Emerging market economies maintained growth, supported by solid global demand, relatively loose financial conditions, improving domestic policymaking in some markets, and higher commodity prices. In China, which has begun feeling the pain of the trade war with the US, GDP growth slowed to 6.6%. India was still going strong, with GDP growth of 7.4%. Latin American growth slowed, with Argentina suffering an economic crisis and Brazil facing a truckers’ strike and uncertainty ahead of general elections. Eastern Europe enjoyed stable expansion of 3.1%, but individual country growth rates varied. Russian growth increased slightly, while the Turkish economy cooled from high credit-fuelled GDP growth in 2017.

For commodity-exporting countries, 2018 was a moderate year. Oil prices were volatile, and prices of commodities such as steel, aluminium and copper were lower.

Global insolvencies continued to decline. The biggest improvements were in Eurozone countries with strong economic growth, like the Netherlands and Ireland, and in those recovering from high insolvency levels, such as Spain and Portugal. However, levels remained high in many Eurozone countries.

Insolvencies declined in the US, but increased in the UK following construction sector difficulties and weakening consumer purchasing power. Most other advanced markets saw stable or declining insolvencies.

In Russia and India, economic growth is expected to lead to declining insolvencies. However, in China, corporate bankruptcies have increased, and South Africa entered a recession, leading to a rise in insolvencies.

What does the economic outlook for 2019 look like?