Magazine: The world economy in 2020

Euromonitor International’s Global Economy in 2020 study reveals that forecasts downgraded the global GDP’s annual growth to 2.9 percent for 2019 and 3.1 percent for 2020. Emerging and developing economies are the most affected by these downgrades – here a 4-percent growth can be expected for 2019 and plus 4.4 percent in 2020.

What are the negative global growth factors? Rising trade war risks, rising geopolitical uncertainty in the Middle East, declining business and consumer confidence, global debt levels rising, low monetary policy interest rates and slow labour productivity growth in advanced economies.

There are positive global growth factors too, such as looser monetary policy, declining long-term interest rates relative to end of 2018, the fact that global consumer confidence remains above average and unemployment staying low in key advanced economies. As for the global risk scenarios, they were influenced by factors in the 4th quarter of 2019 such as rising trade tensions, falling global growth, declining business confidence, higher global turndown, the slowdown of emerging markets and global crisis probabilities.

USA: Having analysed the slowdown in manufacturing and trade, and the ongoing strength in consumer spending, Euromonitor International’s study reveals that the GDP growth fell to 1.5-2 percent year-on-year in the second half of 2019. All Chinese imports to the USA are subject to tariffs since December 2019. Stronger trade war intensity may increase the likeliness of a global downturn scenario via financial market and private sector confidence spillovers.

China: Slowdown is continuing amid worsening export conditions and slower consumer spending growth. Official annual GDP growth is expected to decline towards 5-6 percent in 2020-2021. The chief economic slowdown driver remains the slow pace of structural economic reforms. Among China’s global risks the No.1 is the China-USA trade war. Plus all Chinese imports to the USA under tariffs since December 2019. China remains much more vulnerable to other scenarios such as global downturn and emerging markets slowdown. The global downturn scenario could push GDP growth below 2 percent in 2020. In Chinese consumer spending the forecast is that a shift to higher income classes will occur, where fast 9-15 percent growth is expected.

India: The 2019-2020 growth was very much below expectations. India produced the lowest output growth during the past six years in 2019: the average of the Q1-Q3 growth was at 5.4 percent. The slowdown is related to falling fixed investment and private consumption growth, and the declining private sector confidence in general outlook. However, the GDP growth is expected to recover gradually to 6.5 percent in 2020 and 6.8 percent in 2021. Japan: The country is characterised by weak growth ahead amid worsening global exports demand and sales tax increase. The GDP is expected to grow by 1.0 percent in 2019 and then slow down to 0.3 percent in 2020. Sales tax hike, low global exports demand and typhoon Hagibis will have a negative impact on GDP growth in the last quarter of 2019 and in 2020. Eurozone: The growth slowdown continues. Outlook has continued to worsen during the second half of 2019, with Germany almost entering a technical recession. The GDP growth in Q2-Q3 declined to 1.2 percent year-on-year. Exports, business investment and industrial production have been the focus of the recent slowdown.

United Kingdom: At the beginning of 2020 the UK’s economy is in a state of uncertainty because of the Brexit. Baseline forecast assumes that an EU-UK Brexit deal is reached either as free trade agreement (FTA) or customs union (CU) in 2020. By now the baseline FTA/CU scenario’s probability increased to 70 percent due to the revised Brexit withdrawal agreement in October 2019. Russia: Outlook has worsened because of declining oil revenues amid weak long-term growth potential. Weak economic activity in Q1-Q2 2019, and negative global exports and commodities demand characterise the economic environment. In 2019 the GDP growth is expected to be less than 1 percent; for 2020-2021 the annual growth forecast is 1.5 percent.

Brazil: Weak economy is expected to recover in 2020 – boosted by lower interest rates and fiscal reforms. Brazil’s economy remains weak despite looser monetary policy and lower interest rates. Low inflation combined with high unemployment, low industrial capacity utilisation and business production are signs of ongoing economic weakness. GDP growth drops to 0.2 percent in 2020 and 0.9 percent in 2021.

Summary: Euromonitor International reckons that a moderate global growth slowdown and increasing downside risks characterise the world economy. Global GDP annual growth estimates were downgraded to 2.9 percent in 2019 and 3.1 percent in 2020. //