Global Talent Update - May 2018

GlobeEurope, Middle East and Africa

In the immediate wake of the Brexit referendum, there were some concerns throughout Europe regarding the economic effects of such a geopolitical shift. Yet nearly two years after the Leave vote, it's become clear that the European Union may not have had much to fear in the long run. According to the IMF's Regional Outlook for Europe, domestic demand, investment and credit growth have driven strong economic expansion in the EU, helping to facilitate a 2.7 per cent uptick in real GDP growth during 2017. The global economics organization projects slightly smaller but still noteworthy 2.6 per cent GDP growth for 2018, with notable slowdown of expansion not arriving until 2019's 2.2 per cent predicted growth.

On a nation-by-nation basis, every EU country except the U.K. saw notable real GDP expansion. Prominent standouts included Turkey's 7 per cent growth in 2017, Poland's 5.1 per cent year-over-year jump in 2018's first quarter and the Czech Republic's 4.5 per cent uptick during the same period.

The IMF's main concerns for the EU lie with the risk of inwardly focused, potentially isolationist economic views developing among certain economies, as well as fairly high unemployment rates in France, Italy and Spain. It also noted that while medium-term prospects for Europe aren't as buoyant as the short term, these issues could easily normalize over the long term.

The Moroccan economy depends heavily on agriculture, with the sector employing 40 per cent of the nation's labor force. As such, the voluminous wheat and barley harvest the nation recently experienced helped drive significant growth, according to Morocco World News. Alongside expectations of continued investment in public infrastructure, bountiful crop yields are driving projected GDP growth of 3.6 per cent during 2018.

Increased attention from foreign investors could also help further accelerate Morocco's fiscal strength. Rand Merchant Bank recently included the kingdom of Morocco in its list of the 10 best African nations in which to invest during 2018, with the country taking the third-highest ranking - behind only South Africa and Egypt, and well ahead of Kenya, Tanzania and nearby Tunisia.

Asia-Pacific

The economy of Japan is in a complicated position. Static private consumption and a drop in capital investment led to a 0.6 per cent annualized-rate contraction, constituting the nation's first instance of economic shrinkage in the last two years, according to Bloomberg. The main concern originating from such a drop is arguably its effect on the Bank of Japan's desire to induce 2 per cent inflation within the next few months, a plan threatened by sluggish domestic demand. Atsushi Takeda, an economist with Itochu Corporation, elaborated on this issue.

"Ideally, we should be headed toward an economic expansion led by domestic demand, supported especially by consumption," Takeda said to Bloomberg. "Unless we have that, it's difficult to see a world where Japan's escaped deflation."

Despite indicators like these, many analysts consider Japan's current troubles temporary, with exports leading the way for a rebound. Reuters reported that this market jumped 7.8 per cent year-over-year in April 2018 and also shot up 4.6 per cent on a monthly basis. While the year-over-year growth fell short of economists' 8.1 per cent expectation, monthly export expansion was well ahead of the 1.8 per cent export growth seen in March.

With the government's promise of democratic elections occurring before 2018's end, which could break up the military junta that's held power for the past several years, Thailand could take the world stage on a more substantive level in the near future. Financial Times reported the Southeast Asian nation's economy experienced 4.8 per cent year-over-year growth in 2018's first quarter, the biggest jump in GDP seen in five years. Exports accounted for much of this progress.

Advancements in infrastructure will also play a major role in Thai economic expansion, according to the American Journal of Transportation. These innovations include rail transit, port improvements and aircraft maintenance, to allow for entry into burgeoning markets like petrochemicals.

Americas

After five months of holding steady at 4.1 per cent, the unemployment rate in the U.S. dropped to 3.9 per cent during April 2018, according to the Bureau of Labor Statistics' latest Employment Situation Summary. This dip represented the lowest the jobless rate has fallen since 2000, a year characterized by notable surplus. Additionally, total nonfarm payroll employment increased by 164,000 jobs during this month, slightly below the expectations of economists surveyed by Reuters (who expected a 192,000-job uptick) but still indicative of reasonable progress.

Professional and business services created more jobs for Americans than any other sector, with 54,000 positions added. Manufacturing and healthcare tied for the second place spot in this metric, both seeing 24,000 new jobs added, and the mining sector also saw a notable expansion with the creation of 8,000 roles. No U.S. industries saw significant job losses in April 2018.

Some indicators during this period could be troubling to business leaders and government officials, namely that the labor force participation rate dropped to 62.8 per cent as 236,000 out-of-work Americans stopped actively seeking employment. Also, wage growth slackened, though MUFG Chief Economist Chris Rupkey said that this change might ultimately be a positive:

"[Federal Reserve] officials can rest easy that there is not any wage-based inflation on the horizon," Rupkey told Reuters in an interview. "There is no need to speed up the path of interest rates because inflation isn't heating up in a worrisome manner."

As a result, the Fed's next interest-rate hike likely won't occur ahead of schedule and is a good bet to happen in June, as expected.

Sociopolitical unrest is no stranger to the history of Latin America, and it took its toll on the region's economic progress during much of this decade's first half. However, multiple signs have emerged during the past year to indicate that recovery is on the horizon for multiple nations throughout Central and South America.

Countries including Mexico, Argentina, Ecuador and Brazil all experienced noteworthy expansion in 2017 or early 2018. Mexico's gross domestic product rose 1.1 per cent quarterly and 1.2 per cent year over year in 2018's first quarter. Argentina saw its first GDP growth of any kind in two years, rising 2.7 per cent during the second quarter of 2017, according to Nasdaq.

Ecuador and Brazil haven't experienced quite as much success - Brazil, in particular, has had a flat GDP for some time - but recessions ending in both these nations should galvanize further recovery. Additionally, a surge in e-commerce and tech within Brazil and other Latin American nations could push growth forward even more.

The International Monetary Fund's latest Regional Economic Outlook for Latin America noted that upcoming elections in Central and South America will have notable effects on the economy, though it's currently too early to tell what that will be. Additional fiscal consolidation will also be required in much of the region to help ensure stability, but the overall picture is fairly positive.

 

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