City of Surrey 2017 - 2021 Financial Plan

FINANCIAL OVERVIEW ECONOMIC OVERVIEW

INTERNATIONAL

The global economy is facing various headwinds in the upcoming year. Weak global demand, low commodity prices and increased interest in trade protectionism will continue to weigh on growth. Geo-political factors expected to influence economic activity include unrest in the Middle East, the threat of terrorism, and the ongoing migrant crisis in Europe. The US dollar is expected to gain strength throughout the year due to anticipated tax cuts, fiscal stimulus and increased interest rates. In an effort to lift depressed oil prices, OPEC nations agreed to cut daily production by 1.2 million barrels per day, starting in 2017. If output is slowed as planned, the reduction in excess inventories should boost prices which have been slumping for the past two years. The Eurozone’s economy is forecasted to grow by 1.5% in 2017. High unemployment, low inflation and weak growth plague the region. The European Union’s (“EU”) existence is increasingly vulnerable as the populations of member countries continue to express frustration with poor economic prospects and the increased strain on government resources due to the migrant crisis. The UK has committed to commence the formal process of exiting the EU. Post-Brexit recession fears did not materialize as consumers continued to spend. The British pound has continued its downward slide as uncertainties surround the UK government’s EU- exit strategies. China’s economic growth is forecasted at 6.5% for 2017 while the Yuan is forecasted to depreciate up to 5% against the US dollar. An over-reliance on cheap credit has resulted in China’s debt load reaching 250% of Gross Domestic Product (“GDP”), fueling concerns that the country is becoming over-leveraged. Expectations of large infrastructure spending, pro-businesses policies, decreased regulation, and tax reforms by the Trump administration have provided a boost to US stocks. The Federal Reserve raised its key interest rate by 0.25% last December and has signalled that up to three additional rate increases are possible over the course of 2017. As interest rates rise, increased demand for US dollar denominated investments will further strengthen the currency. The Federal Reserve forecasts GDP growth at 2.1% with unemployment falling to 4.5% during 2017. Lower taxation, better labour market conditions and increased fiscal spending will translate into improved wages for workers. Higher disposable incomes and consumer spending should push inflation upwards to the forecasted target rate of 2%. UNITED STATES

2017-2021 FINANCIAL PLAN

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