Global outlook – Initially weak, then better

by: Han de Jong

There is reason to assume that 2020 will bring an acceleration in global growth

191203-Global-Outlook-Eng.pdf (293 KB)
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Summary:

On balance we look ahead to 2020 with some optimism. The global economy has weakened significantly in the past two years. But there is reason to assume that 2020 will bring an acceleration in global growth. One crucial factor is the (temporary) termination of the conflict between China and the US. If that conflict is allowed to drag on or escalate further, the global economy will suffer badly in 2020. We assume that the antagonists will reach an agreement some time soon, even if an agreement is torn up again after the US elections.

Other positive factors for 2020 are the Chinese stimulus measures, the effects of monetary relaxation in the US, the probable upturn in fortunes for (German) car companies, the roll-out of 5G, the slightly lower oil price, the moderately expansive budget policy in Europe, the onset of catch-up demand as the current uncertainties recede and the inventory cycle in several important sectors. At the moment, we already see a broad-based uplift in confidence indicators, albeit from low levels. Though conditions remain fragile, this development does point to an improvement in the global economy in the course of 2020.

As ever, risks and uncertainties abound around the world. The US elections will cast a shadow as the year unfolds. Brexit appears to have moved into calmer waters, though new and unpleasant surprises cannot be excluded. Nor is it clear whether the ECB will change its course under new leadership. The same applies to the European Commission. There are also risks concerning government policy. Many governments face mounting pressure to step up their efforts to achieve the Paris Climate objectives. This could easily lead to knee-jerk measures that may have abrupt and negative effects on business activity in the short term.