The global economic expansion has become less even, according to economists at the Peterson Institute for International Economics (PIIE). Overall global growth is expected to reach 3.8 percent in 2018 and 2019, led by a fiscal-driven pickup in US GDP growth. However, most other advanced economies are likely to see slower growth than they did in 2017. Furthermore, the risks of economic growth being derailed have risen in some emerging-market countries with weak fundamentals and in the United Kingdom, where doubts about a smooth exit from the European Union have increased.

Analysts expect the global economy to grow 3.8 percent through 2019 driven largely by the United States, which is expected to reach nearly 3 percent growth in 2018 and decline to 2.5 percent growth in 2019. Inflation will likely modestly over-shoot the Federal Reserve’s target of 2 percent in 2019 and 2020 amid further tightening in the labor market, with unemployment expected to fall to 3.5 percent next year. The Federal Reserve is expected to continue its gradual normalization of monetary policy with four rate hikes in 2018, three in 2019, and one in 2020, though interest rates will likely remain low by historical standards.

But analysts caution that the outlook could be downgraded if a trade war spills into the financial markets, inflation rises more sharply than expected, or US asset prices experience a material decline.

The major emerging-market economies are in precarious states, with Argentina, Turkey, and Brazil the worst affected. Argentina and Turkey’s current account balances, reserves, exchange rates, and high levels of corporate debt leave both countries with no policy room to improve their economies and more vulnerable to economic shocks. Mexico’s economy remains strong, and the newly announced United States – Mexico – Canada Agreement (USMCA) on trade staves off investment concerns in the coming months.