“After a period of synchronous slowing, the global economy is showing signs of stabilizing. Global growth is projected to strengthen gradually. Survey data suggest that manufacturing activity is starting to pick up in many regions. Service sector indicators have softened recently but remain healthy. Unemployment rates continue to be near historic lows in many advanced economies." (Bank of Canada Monetary Policy Report, Jan. 2020)

Expectations relating to a global economic turnaround this year were improving prior to the outbreak of the coronavirus.

Improving expectations were based on the signing of the Phase 1 trade deal between the United States and China that seemed to lower the temperature and provide a bit of certainty at least to the 2020 outlook.

At least the agreement seemed to temporarily forestall additional tariffs between the world’s two largest economies. The US Administration also signed a revised North American Free Trade Agreement, which clearly improved the outlooks for the Mexican and Canadian economies.

Of course, the positives on the international trade side have been dampened by the outbreak of the new coronavirus, which is forcing quarantines in China, shuttering multinational operations in the country and causing nervousness around the world.

Over the past two years, global growth slowed precipitously, from 3.7% in 2018 to 2.9 % last year. The two largest economies also slowed sharply in this picture, with the US economy decelerating from 2.9% to 2.3%, and China’s economy slowing from 6.7% to 6.1%.

Looking ahead, the US was expected to grow a slow 1.9% in 2020 as well as in 2021. China’s economy was originally projected to expand 5.9% and 5.7% in the forecast period, but clearly these numbers are too high in view of the virus impact.

The Canadian economy also slowed sharply last year to only a 1.6% pace and the Bank of Canada recently projected another slow 1.6% expansion in 2020, with a slight pickup to 2% growth in 2021.