January 31, 2018

Improving Economy Likely to Lead to Expanded Loan Growth in 2018

Excerpt:

Banks should see rising loan growth in 2018, as global economies are forecast to expand at their highest rate since 2011. The forecast comes from the 189-member nation World Bank, which in early January revised its global growth rate expectations to a 3.1% aggregate, 0.3 percentage points higher than it expected in June. The United States economy is now forecast to rise 2.5% in 2018, up from the World Bank’s June forecast of 2.2%.

Article:

Banks should see rising loan growth in 2018, as global economies are forecast to rise at their highest rate since 2011.

Economies around the world are expected to expand in 2018.

Both U.S. and Global Economic Forecasts Raised by World Bank

The forecast comes from the 189-member nation World Bank, which in early January revised its global growth rate expectations to a 3.1% aggregate, 0.3 percentage points higher than it expected in June. The United States economy is now forecast to rise 2.5% in 2018, up from the World Bank’s June forecast of 2.2%.

The increases in the forecast stem from broadly strengthening economic activity around the world, in contrast to at least seven years of very lukewarm growth, which has led to increased investment, upticks in manufacturing, and stronger flows of trade. 

The World Bank also expects the recently enacted tax cuts in the United States to strengthen the nation’s economy.

The Trump administration is projecting that the nation’s economy will expand at least 3% this year, due to tax cuts, deregulation, and more stringent trade law enforcement.

China’s economy is projected to expand 6.4% in 2018, according to the World Bank. It estimates that the Eurozone economies will climb 2.1% and Japan 1.3% in the same period.

The news is potentially very good for bank loan growth. With economies strengthened, consumer confidence and disposable income are highly likely to increase. This drives consumer loan growth, so mortgage, auto, and personal loan originations are all likely to climb.

As economies strengthen, businesses expand, so business loan originations are also likely to see broad increases across the board.

The U.S. economy is poised to rise 2.5% this year, according to the World Bank.

Forecast Growth Continuing at Slower Pace in 2019 and 2020 

The World Bank sees continued growth past 2018, but at a slightly slower pace. It predicts global growth of 3% for 2019 and 2.9% in 2020. Global economies expanded 3% in 2017, a much-improved pace from 2016’s 2.4% expansion. The results in 2016 were the lowest since 2009, when the global economy contracted 1.8%

The current forecast, therefore, sees at least four years of robust economic growth going forward. For the United States, the forecast is for 2.2% economic growth in 2019 and 2% in 2020.

All the good news aside, the World Bank also sees global economies facing some risks in 2018. Rising interest rates, forecast in the U.S. and several other nations, have the potential to dampen economic expansion. Increased trade protection sentiment and political action could also exert pressure on economies worldwide.

Talk to a Seasoned Loan Advisor 

Economic forecasts see good news for economies both in the U.S. and across the globe. Growing economies are good news for loan originations. Talk to a seasoned loan advisor at Garnet Capital about maximizing your portfolio going forward today.

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