September 2019 GLOBAL GROWTH OUTLOOK
Shock treatment US protectionism and Brexit increasing risk of recession
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Global economic growth will drop down to only three percent this year, the weakest growth seen since 2002. Global trade is likely to grow only marginally above the previous year’s level. Global industrial production is expected to grow one percent at most.
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The risk of further upheavals to the world economy remain very high. The trade disputes between the United States and China and the EU are already significantly hampering investment activity and foreign trade. The risk of a disorderly Brexit is an additional source of strain. The major central banks are already responding to these risks. Too little action is being taken on the fiscal policy front. Powerful stimuli are much needed.
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We expect the U.S. economy to grow by 2½ percent this year. The Fed is holding out against Trump’s policy of spreading uncertainty. China’s economy continues to lose steam, but growth could still reach 6¼ percent. Japan’s economy should manage to maintain its growth rate of one percent. Prospects for the next year are weaker.
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Europe’s economy is cooling down markedly. Monetary and fiscal measures need to be implemented now to fend off a recession next year. Reforms and investment in infrastructure would also help significantly.
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Germany’s industry is in recession. The German economy is still growing slightly overall but gloomy trade prospects are likely to curb investment activity and foreign trade over the next few quarters. Economic policy must unleash powerful impetus now to stop the downturn spreading to the whole economy.