Away from a synchronized growth story in 2018, economic themes in the global space such as rising trade protectionism, political discord, inter-regional conflicts and reactive policy responses, gave birth to the world’s new economic milieu – “uncertainty”. As a result, global economic growth in 2019 tilted towards a synchronized slowdown, as growth in some major Advanced Economies (AEs) and Emerging Markets (EMs) decelerated.
Manufacturing and trade sectors were the most impaired by general policy uncertainty, as global manufacturing PMI remained in the contractionary region and growth in world merchandise trade for H1-19 stood at 0.6% y/y, its weakest level in recent years. According to the IMF, global growth for 2019 is projected to slow to 3.0%y/y amid slower growth in AEs and key EM economies.
In 2020, the IMF forecasts global growth to be stronger at 3.4% y/y, driven by recoveries across EMs, which are projected at 4.6% y/y. On the other hand, AEs are expected to slow to 1.7% y/y. No doubt, the IMF’s forecast is a sweeter tale than 2019. Though, it remains below the 5-year and 20- year average of 3.41% and 3.8% respectively, indicating a gap from long-term potential. Bearing the above in mind, the global economy is stuck between two possibilities; the first is that of an unsynchronized rebound, to be driven by easy monetary policy, improved trade relations, a more supportive fiscal policy and recovery in emerging market economies. The second possibility remains a broad-based weaker growth if the factors above fail to materialize.
United Capital Research