As 2019 drew to a close, the global economy appeared to be teetering on the precipice. However, while recent data supports this bleak prognosis, forecasters suggest 2020 will witness a recovery, albeit a relatively weak one.
GROWTH RATES DECLINE
Third-quarter gross domestic product (GDP) data revealed a continuing decline in global growth. In the US, for instance, GDP rose at an annualised rate of 1.9%, slightly below the 2.0% recorded in the previous quarter, while China’s growth rate of 6.0% was the country’s slowest in at least 27½ years.
Although the UK and German economies both grew in the third quarter, thereby avoiding consecutive quarters of negative growth – the ‘technical’ definition of recession – neither flourished. Indeed, the UK recorded its slowest annual rate in almost a decade, while the German economy actually shrank in the six months to end-September.
In its latest economic soothsaying, published mid-October, the International Monetary Fund (IMF) said the global economy is growing at its slowest pace since the financial crisis and downgraded its 2019 world growth forecast to 3.0%, a 0.3 percentage point reduction from April estimates. It also stressed risks remain skewed to the downside and described the outlook as ‘precarious‘.
GROUNDS FOR CAUTIOUS OPTIMISM?
The IMF did, however, predict growth will pick up in 2020, with the world economy forecast to expand by 3.4% next year. While this may suggest green shoots of recovery are set to emerge, it does also clearly imply any recovery is likely to be modest.