E The Global Outlook Is Looking Slightly Less Gloomy

“Owing to a recent easing of both Sino-American tensions and monetary policies, many investors seem to be betting on another era of expansion for the global economy. But they would do well to remember that the fundamental risks to growth remain and are actually getting worse.”
                                                                                                            (Nouriel Roubini, Project Syndicate, Nov. 20, 2019)

Pundits are currently somewhat more optimistic that the lengthy global economic recovery from the Great Recession, which ended in 2019, may have more legs. 

The renewed optimism is partly based on strong equity markets, but also on the expectation that the global economic growth outlook for 2020 should be slightly stronger than this year’s slow growth.

For example, according to the IMF, this year’s slow 3.2% global growth rate should be followed in 2020 with about 3.4% growth, and as well, the international pace of inflation should also increase next year.  The Goldman Sachs global projections which are presented below are entirely consistent with this view. 

As Roubini observes, the modest shift in the optimistic direction seems to hinge of four somewhat newer factors. 

The first is a slight easing in the concern surrounding the US-China trade war, since it is assumed that a “phase-one” trade deal will be concluded this year, and which suggests that at least for a while there will not be a further escalation in the trade and technology war. 

Second, markets are also hoping for a slightly improved outlook on the Brexit file. The assumption is that Boris Johnson will win the UK election and in turn should be able to achieve a rather softer Brexit deal with the EU. In other words, the UK will be able to avoid crashing disastrously out of the EU bloc. Avoiding a no deal Brexit would also boost European growth next year and in 2021.

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