Annual world economic growth is forecast to decelerate to 3.5% in 2019 and 2020, down from 3.7% in 2018, Euromonitor International said in its latest report titled “Global Economic Forecasts Q1 2019”.
This deterioration in the global outlook has primarily been a result of downgrades to the advanced economies, including the US and the Eurozone, but also to some emerging economies such as Mexico and Russia, the report said.
The London-based market research company estimates real GDP in advanced economies will grow by 2.0% in 2019 and 1.7% in 2020, a decline from 2.3% growth in 2018. Emerging economies are anticipated to see a steadier real GDP growth of 4.6% in 2019 and 4.7% in 2020, which is similar to a pace of 4.6% in 2018.
Risks remain high
The world trade growth is likely to weaken in 2019 as a result of a pullback in globalisation and higher political risks, such as the possibility of a no-deal Brexit and US-China trade war uncertainty. Other risks are stemming from the recent decline in financial asset prices, tightening financial conditions and lower oil prices, Euromonitor said.
Overall global risk outlook has worsened since August. Escalating trade barriers, increasing political risks, and worsening financial market conditions could further reduce growth across advanced and emerging economies alike.
Major forecast revisions for US, Eurozone, Mexico, Russia
Worsening trade and political uncertainty combined with a more transitory impact of the 2018 business tax cuts on investments has led Euromonitor International to reduce the US real GDP growth forecast to 2.4 per cent in 2019 and 1.7 per cent in 2020.
More negative news at the end of 2018 including the Gilets Jaunes protests in France and some sectoral industry shocks in Germany led to further downgrades in the Eurozone outlook. Private sector sentiment has declined to the lowest level in two years, and GDP growth in Q4 2018 was just 1.2% year on year. Real GDP is to grow by 1.7 per cent in 2019 and 1.6 per cent in 2020.
Euromonitor International has downgraded Mexican GDP growth forecasts by 0.3–0.4 percentage points in 2019–2020. This reflects worse than expected growth at the end of 2018, a worsening global trade environment, higher risks of currency devaluation, inflation and a tighter monetary policy
has cut the Russian GDP growth forecasts to 1.3–1.4 per cent in 2019-2020 due the worsening oil price outlook. The price per barrel of Brent oil has declined from USD80–85 in September–October 2018 to USD60–65 in January, and it is expected to remain in that range in 2019–2020.
“We have kept our baseline real GDP growth at 1.5 per cent in 2019 and 1.4 per cent in 2020. However, the baseline is just one of several possible scenarios,” the report said.
The impact from the US-China trade war weighs on Japan's economy with GDP growth declining in Q3. Euromonitor International has reduced real GDP growth forecasts to 0.6 per cent in 2019 and 0.6 per cent again in 2020.
The China-US trade war continues to take a toll on China's economy. The country is also facing growing concerns about a domestic demand slowdown.“We have for now kept GDP growth forecasts at 6.1 per cent in 2019 and 5.9 per cent in 2020,”Euromonitor said.
Euromonitor’s real GDP growth forecast is unchanged at 2.2 per cent in 2019, 2.4 per cent in 2020. Brazil’s business confidence has jumped on the new president’s market-friendly policies.
Euromonitor has reduced real GDP growth forecasts to 7.4 per cent in 2019 and 7.5 per cent in 2020.India’s economy decelerated slightly in Q3 2018, dragged down by private consumption and net exports.
Recently, the Organisation for Economic Cooperation and Development (OECD) also cut its 2019 world growth forecast to 3.5 percent from 3.7 percent. The Paris-based economic watchdog said world growth is past its peak and faces risks from trade tensions and higher interest rates.