COS Financial Plan 2018 - 2022

FINANCIAL OVERVIEW ECONOMIC OVERVIEW

INTERNATIONAL The International Monetary Fund (IMF) is forecasting the global economy to advance at a pace of 3.9% this year. Growth is expected to be broad-based, affecting both emerging and developed countries. The IMF continues to call on governments around the world to undertake structural and governance reforms to increase the resiliency of their economies in the face of future downturns. The Organization of Petroleum Exporting Countries (OPEC), along with 10 other non- OPEC nations, has agreed to extend production cuts to the end of 2018 with the possibility of an extension into 2019. Oil prices are forecasted to hover around $55 to $60 USD per barrel this year due to strong compliance with planned supply reductions and improved global demand. The gain in oil’s value faces a threat as United States (US) shale producers could ramp up production, offsetting supply control measures and putting downward pressure on prices. The European Central Bank (ECB) is forecasting 2018 Eurozone Gross Domestic Product (GDP) and inflation at 2.3% and 1.4%, respectively. Euro area unemployment fell to 8.8% in October 2017 but some member countries still face double digit unemployment rates. The ECB announced that it will reduce its bond purchase program from €60 billion to €30 billion from January to September 2018 with no end date set for quantitative easing. There is increased pressure from the Netherlands and Germany to end the asset purchasing program as the Eurozone economy continues to show improvement. The threat of further European Union (EU) nations leaving the Eurozone is calmed for now. Major elections in the Netherlands, France and Germany did not result in Euro skeptic parties coming to the forefront. The German election failed to produce a majority government. Negotiations to form a majority government are still ongoing four months after the election. The Italian election in 2018 will be closely watched by financial markets as a Euro-skeptic party is currently leading in the polls. The United Kingdom (UK) and the EU have agreed to advance to the stage of Brexit talks after breaking an impasse on the “divorce” bill and agreeing to a settlement amount of €50 billion. The uncertainties surrounding Brexit will continue to weigh down the UK economy with GDP forecasted to grow by 1.4% this year. The Bank of England (BOE) raised interest rates by 25 basis points last November, the first such increase in over 10 years. The BOE is under pressure to raise rates amidst rising inflation. Wage increases have not kept up with the rate of inflation and rising prices are hampering consumer spending. The pound continues to depreciate as the central bank indicated that interest rate increases will be gradual and limited going forward. Analysts do not expect any rate moves by the BOE until the second quarter of 2018.

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2018-2022 Financial Plan

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