Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Another lacklustre year of economic growth lies ahead

Posted by hkarner - 4. Januar 2020

Date: 02‑01‑2020

Source: The Economist

Better than 2019, but not much

GLOBAL GROWTH in 2019 was the slowest since the financial crisis of 2008‑09. The world’s GDP rose by roughly 2.2%. This year will be little better, according to the latest estimates from the Economist Intelligence Unit (EIU), a sister company of The Economist. The EIU forecasts that the global economy will expand by 2.4% in 2020.

Rich economies are expected to grow at roughly the same lacklustre pace as they did in 2019—the euro zone’s, almost exactly the same: 1.3%, against 1.2% last year. The EIU sees a fairly sharp slowdown in America, from 2.3% to 1.7%, as trade tensions continue to depress trade and investment. A continuation of the global slowdown in manufacturing will also drag down growth worldwide. A no‑deal Brexit could make matters worse, for Britain and its trading partners.

Developing countries, meanwhile, will see slightly faster growth in 2020 (although in the biggest, China, the rate will fall a little, from 6.1% to 5.9%). Vietnam’s GDP is forecast to grow by 6.7% and India’s by 6.1%. Guyana, which will begin earning revenue from offshore oil reserves in 2020, is predicted to clock up a stunning 35%. Yet the EIU says that much of the improvement in emerging‑market growth will be the result not of stronger expansions, but shallower recessions. Argentina’s economy, for example, is forecast to contract by 2.5%, having shrunk by 3.3% in 2019. Venezuela’s is expected to suffer a 20.5% decline, after shrivelling by 36.2% last year. Indeed, according to the latest World Economic Outlook from the International Monetary Fund (IMF), about 70% of the projected pick‑up in global growth in 2020 will come from countries that are either underperforming or in “severe distress”.

Governments have plenty of scope to boost output by pursuing sensible policies and abandoning foolish ones. They may not help. The biggest threat to growth continues to be the Sino‑American trade war (which the IMF reckons could slash global GDP by 0.8% in 2020). In December President Donald Trump announced a “phase one” deal with China, which would see America roll back some tariffs in exchange for Chinese concessions including higher purchases of agricultural goods. But some caution is in order, even if the deal is signed this month as planned. Tensions will remain, and Mr Trump is not famed for his consistency. After a similar agreement fell apart last May, he tweeted: “Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch!”

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