Multi-Asset

Pyrford Perspectives: lower global growth forecasts

The IMF lowered global growth forecasts again during its October update.
November 2019

Risk warnings

The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

The IMF lowered global growth forecasts again during its October update. In the current year, world output is expected to increase by 3.0%, which marks a 0.2% reduction from its forecast in July. The advanced and developing world share equally in the reduction. In 2020, world output is forecast to grow by 3.4%, a 0.1% reduction from its July forecast.

The IMF comments: “The global economy is in a synchronised slowdown… a consequence of rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and aging demographics in advanced economies… A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade.”

Risk warnings

The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Understandably, the trade issue is emphasised in the IMF release: “Some of the biggest downward revisions for growth are for advanced economies in Asia, including Hong Kong… Korea, and Singapore, a common factor being their exposure to slowing growth in China and spillovers from US-China trade tensions.” Indeed, real GDP growth in Singapore has fallen to zero year on year to September. In Hong Kong, real GDP barely grew in the year to June and no doubt the September numbers, when available, will show further deterioration. In South Korea, annual growth is down to 2% to September and on a declining trend. The IMF commented that “there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions.”

The damaging trade conflict between the US and China shows only limited signs of easing. Every so often, there appears some hope of rapprochement, but then the hope is ruthlessly torn away. President Trump is fond of advertising all the good his tariffs are doing – but what we see is a major slowdown in world trade volumes (from around 5% growth in 2017 to negative in the current year) plus accompanying slowdowns in industrial production and new manufacturing orders.  

 

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