OPEC MOMR November 2017
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World Economy

OPEC Monthly Oil Market Report – November 2017


The most recent developments confirm a solid underlying growth dynamic in the Japanese economy. This

has been already taken into consideration in the past month’s

GDP growth

forecast estimation for 2017,

which therefore remains at 1.6%. The 2018 growth forecast was revised up to 1.3%, compared to 1.2% in

the previous month’s assessment. Challenges in the economy persist, and given the tight labour market

situation and high capacity utilisation rates, further growth potential seems limited for now, however

continued government policies are expected to support growth levels at around the current level.

South Korea

Latest output data for South Korea has underpinned strong momentum in the economy as geopolitical

concerns on the Korean peninsula continue. 3Q17 GDP growth stood at 5.8% q-o-q SAAR, according to the

Bank of Korea, the country’s central bank. This is the highest growth rate since 2010, when a large global

stimulus was implemented by the G20, including South-Korea. Exports were a major driver, picking up by

26.9% q-o-q SAAR. Also, domestic demand remains strong, with private consumption picking up by 2.9%

q-o-q SAAR. This comes as consumer sentiment is holding up and remains almost unchanged at a record

level for around the last 6 months. This strong momentum has also been reflected in non-seasonally



numbers. IP rose by 7.4% y-o-y in September, up from 2.5% y-o-y in August. The latest


number for the manufacturing sector in October indicated ongoing momentum, however with a slight slow-

down so far in 4Q17. It stood at 50.4 in October, after 50.6 in September. Considering the strong 3Q17

output and the ongoing momentum with some carry-over into 2018, the

GDP growth

forecast has been

revised up to 3.0% in 2017, compared with 2.7% in the previous month. Moreover, the 2018 GDP growth

forecast was also revised up to now stand at 2.5%, compared with 2.4% in the previous month’s forecast.

OECD Europe


After a relatively robust 1H17, Euro-zone growth was again confirmed at a strong level in 3Q17. It stood at

0.6% q-o-q seasonally adjusted (SA) and hence was better than expected, a momentum that seems to

continue in 4Q17 and is expected to last in 2018, albeit at a slightly slower pace. The strong growth

momentum in 3Q17 also marks the fourth consecutive quarter of strong GDP growth, which is a substantial

trend. Moreover, it seems to be broad based in the Euro-zone, as the dynamic is visible in all economies, at

varying rates, and seems to be well supported across the various sectors. Private household consumption

remained healthy in 3Q17 at 0.6% q-o-q, SA. Particularly investments were very strong as they rose by 2.0%

q-o-q SA. The positive momentum is also supported by ongoing improving business confidence numbers

and consumer confidence levels. A major driver in this regard is the declining unemployment rate and other

labour market-related improvements.

One important sector, however, that continues to face challenges is the banking sector. The ECB has

recently highlighted the need for higher capital levels in some larger institutions in order to offset the ongoing

significant share of non-performing loans in the Eurozone’s banking system. To clean up the banking sector

remains a key-initiative for the ECB, as bank financing is a major source of funding for the important small

and medium-sized enterprises (SMEs) in the Euro-zone. It also remains an important aspect in the

normalisation of the ECB’s monetary policies. In its latest end-of-October meeting, the ECB unveiled a plan

on how to gradually reduce its monetary support. Most importantly, the governing council announced a cut in

monthly QE purchases to €30bn from the current level of €60bn, starting in January and running until

September, compared to the initial plan to pursue QE until March. It was highlighted that QE could be

continued beyond that time, if necessary, and until there is a sustained adjustment in the path of inflation.

Also, the EBC kept its main policy rate at 0.00% and the rate for deposit facility at -0.4%. In light of the

ongoing high sovereign debt levels in some key economies in the Euro-zone, the ECB’s monetary policies

will likely be important for state finances.

Business sentiment has continued to reflect the improving situation, with the European Commission’s

economic sentiment index rising to 114.0 in October, compared with 113.0 a month earlier. This is the peak

level in more than 10 years. Challenges in the Euro-zone remain. Aside from the issues in the banking

sector, sovereign debt levels in some Euro-zone economies may become a re-emerging issue, if current

economic improvements slow or interest rates rise too soon or too quickly. Also, political uncertainty has

risen, as government-forming negotiations seem to be progressing slowly in Germany and Austria after the

recent elections, and as the independence-seeking region of Catalonia has raised some economic

uncertainty in Spain, while so far the impact seems to have been limited.