For the last few years, the global economy has been oscillating between periods of acceleration (when growth is positive and strengthening) and periods of deceleration (when growth is positive but weakening). The current upswing in growth and equity markets has been going strong since the summer of 2016. Will the recent growth spurt continue over the next few years? Or is the world experiencing a temporary cyclical upswing that will soon be subdued by new tail risks, like those that have triggered other slowdowns in recent years? One can envision three possible scenarios for the global economy in the next three years or so. In the bullish scenario, the world’s four largest, systemically important economies—China, the eurozone, Japan, and the US—implement structural reforms that boost potential growth and address financial vulnerabilities. In the bearish scenario, the opposite happens: the world’s major economies fail to implement structural reforms that boost potential growth. The third—and most likely—scenario lies somewhere between the first two. The cyclical upswing, in both growth and equity markets, continues for a while, driven by remaining tailwinds. Either political leaders and policymakers demonstrate the leadership needed to secure a better medium-term outlook, or downside risks will materialize—and do serious damage to the global economy.

(Live Mint)