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The global economy is slowing at the same time, and we have revised down the growth rate for 2019 again to 3%, the slowest pace since the global financial crisis. Growth continues to slow due to rising trade barriers and rising geopolitical tensions. We estimate that the US-China trade conflict will cumulatively reduce global GDP levels by 0.8% by 2020. Structural factors, such as country-specific factors in some emerging market economies and low productivity growth, are also weighing on growth. and demographic aging in developed countries.
The October World Economic Outlook forecast a slight improvement in global growth to 3.4% in 2020, a further 0.2% downward revision from the April forecast. However, unlike the synchronized economic slowdown, this recovery has not been widespread and remains fragile.
The slowdown in growth is due to a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty hurting investment and demand for capital goods. In addition, the auto industry is contracting due to a variety of factors, including disruptions caused by new emissions standards in the euro area and China, which are having long-term effects. Overall, trade volume growth fell to 1% in the first half of 2019, the lowest level since 2012.
The growth rate for 2019 has been revised downward to 3%, the slowest pace since the global financial crisis.
In contrast to the extremely weak manufacturing and trade sectors, the services sector continues to perform well across most of the world. This has kept labor markets vibrant and wage growth and consumer spending healthy in developed countries. However, there are some early signs of softening in the services sector in the US and the euro area.
Monetary policy has played an important role in supporting growth. In the absence of inflationary pressures and in the face of slowing economic activity, major central banks have provided appropriate easing to reduce downside risks to growth and prevent inflation expectations from becoming entrenched. In our assessment, without such monetary stimulus, global growth would fall by 0.5 percentage points in both 2019 and 2020.
Developed economies continue to slow down towards a decline in long-term potential. The growth rate was lowered to 1.7% in 2019 (2.3% in 2018) and is expected to remain at this level in 2020. Robust labor market conditions and policy stimulus are helping to offset the negative impact of weak external demand on these economies. .
Growth rates in emerging market and developing countries have also been revised downward to 3.9% in 2019 (from 4.5% in 2018) due to trade and domestic policy uncertainties, as well as the structural slowdown in China. Ta.
The rise in global growth in 2020 is driven by emerging market and developing economies, where growth is expected to rebound to 4.6%. About half of this recovery is due to recoveries and shallower recessions in stressed emerging markets such as Argentina, Iran, and Turkey, and the rest is due to weaker recessions in stressed emerging markets such as Argentina, Iran, and Turkey, and the rest is due to growth in 2019 and 2018 growth, such as Brazil, India, and Mexico. This is due to the country's recovery, which has slowed significantly compared to the previous year. , Russia, Saudi Arabia. However, there is considerable uncertainty surrounding these recoveries, especially if major economies such as the United States, Japan, and China are expected to slow further into 2020.
increasing risk
Additionally, there are some downside risks to growth. Escalating trade and geopolitical tensions, including Brexit-related risks, could further disrupt economic activity and derail the already fragile recovery in emerging markets and the euro area. This could lead to sudden changes in risk sentiment, financial turmoil and reversal of capital flows to emerging market countries. In developed countries, low inflation is likely to become entrenched, constraining monetary policy space and limiting its effectiveness into the future.
Policies to reignite growth
To revitalize growth, policymakers need to cancel trade barriers erected by durable agreements, curb geopolitical tensions, and reduce domestic policy uncertainty. Such actions will help boost confidence and stimulate investment, manufacturing and trade. In this regard, we look forward to further details regarding the recently reached interim agreement between China and the United States. We welcome any measures to reduce tensions and reverse recent trade measures, especially if they can provide a path towards a comprehensive and durable agreement.
Economic policy needs to support activity in a more balanced way to avoid other risks to growth and increase potential output. Monetary policy is not the only game. This should be combined with fiscal support if there is fiscal space and policies are not already too expansionary. Countries like Germany and the Netherlands should take advantage of low borrowing rates to invest in social and infrastructure capital, purely from a cost-benefit perspective. A more severe deterioration in growth may require fiscal responses that are internationally tailored to each country's circumstances.
While monetary easing has supported growth, effective macroprudential regulation is now essential to prevent mispricing of risks and excessive accumulation of financial vulnerabilities.
For sustainable growth, it is important that countries engage in structural reforms to increase productivity, increase resilience and reduce inequality. Reforms in emerging market and developing countries are also more effective when good governance is already in place.
The global outlook remains uncertain with a simultaneous economic slowdown and an uncertain recovery. At a growth rate of 3%, there is no margin for policy error, and there is an urgent need for policymakers to support growth. The global trading system needs to be improved, not abandoned. Countries must work together because multilateralism remains the only solution to tackling key issues such as climate risks, cybersecurity risks, tax avoidance and evasion, and the opportunities and challenges of new financial technologies. There is a need.
