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Storm Clouds Are Brewing for the Global Economy In 2019

by May 10, 2019Economics0 comments

At the beginning of 2018, global economy kickstarted with positive feedback on growth rates from different global economic charts. But with the progress of time, the momentum was lost entirely within a matter of months. As a result, the growth rates diverged.

On the contrary the US economy took a new accelerated turn due to the fiscal stimulus which was enacted in the started phases of the year.

Several other world economic powerhouses including China, Japan, UK and almost all of Eurozone started to hinter. According to predictions, the rates are further expected to fluctuate, and the global economic crisis would seem to take a bigger picture.

Most of the drop in the global economic cycle can be attributed to the ongoing trade wars. As a result, the growth rates fell below 5% globally at the very beginning of 2018 and further deuterated as the year progressed reaching zero figure.

The trade conflicts are not predicted to stop anytime soon. Thus, there is no chance of changing the progressive down dip of the global economic cycles.

On the other side, the interest rates are increasing subsequently which has brought about volatility in the community market leading to further tightening of financial markets. All these add up to a bleak economic down plunge in the next few years to come.

Some of the predicted economic changes in 2019 are mentioned below:

  • US trends of economic growth are expected to continue their dominance over the next few years to come. Based on productivity and sustainable growth rates, the growth trend of the US economy is expected to have positive feedback of 2%.
  • Most of the growth in the economy is attributed to the recession of taxation rates and increased spending. This impending stimulus will be continued in 2019, but its rate will drop down a bit as the year progresses. Thus, the expected growth rate will be around 2.6% which is about 0.3% less than that in 2018.
  • Expansion of Europe will be slower than the previous years to come. The growth in economy peaked in 2017 and declined ever since. According to predictions of IHS market there will be a further decline of 1.5% in the economic rates in 2019.
  • Several factors have contributed to this fluctuation in economic rates and the very first picture that comes up in mind is that of the downfall of Brexit. Several other factors of downfall include the winding down of the chancellorship of Angela Merkel and opposition challenges faced by Emmanuel Macron government. Tightening of overall trade marketing businesses due to concise credit conditions are also the driving factors.
  • Japan’s economy is predicted to grow radically back in 2018, but the scenario has turned out to be just the opposite. As of now in 2019, the growth rates of Japan are only about 0.9 compared to predicted higher growth rates.
  • This change is due to the ongoing slow trade relations with China and its eventual fallout. China’s economy has suffered a major slowdown due to unforsaken monetary policies. The periodic cyclic decline is quite evident even though there is a meager increase in growth rates on a larger scale. Adverse demographic schemes which are quite naturally the most evident deciding factor of the labor force is never fully overcome with strong productivities.
  • China’s growth rate had taken a hit and was recorded to be the world back in 2018, over the last 10 year. The growth rates have been deaccelerating at a progressive rate from 6.9 back in 2017 to 6.3 as of the predictions for 2019.
  • The many reasons that contribute to this down dip curve are mainly due to the ongoing trade tensions with the US. Even though many provisional monetary policies have been implemented along with fiscal measures, the financial market has never truly been stabilized. The sole reason being, the huge debt that overhang and also the government’s commitments of deleveraging.
  • Emerging countries are expected to decelerate to 4.6 in 2019. Countries such as India, Brazil, and Russia had experienced a rise in the economy in the middle of 2018. But those trends are expected to go down as well. Countries such as Argentina, Turkey and South Africa are already on the downhill path.
  • The pace of world trade and slow growth of most powerful economies of the world can be a major factor of this downfall. Financial conditions have tightened up globally and US dollar rates have gone up. These progressive countries are experiencing an increasing debt. These issues multiplied by several political agendas in countries such as Mexico and Brazil have added to the further winding down of the economic scales.
  • The demand fo0r commodities are going to increase more and more, so there are no chances of experiencing a major collapse in this field like that which took place back in 2015. But volatilities in commodity markets are going to continue in full strength in 2019 as well.  Especially in the oil markets, the need for fuel is higher than ever before, even though there are new alternatives in the market. The price of oil is expected to rise and reach $71 globally.
  • Price inflation rise of the consumers is expected to remain within 3.0%. Upward pressures will continue to build up in any of the economies of the world but the gap is expected to significantly reduce. The rates of unemployment are also expected to fall since there are new demanding fields which require manpower.
  • With a temporary truce in the ongoing trade wards, the economies can be stabilized for a short period of time but the urgency to find a permanent solution is one a very high demand.
  • Central banks are moving in many directions due to the ongoing dynamic changes in the world economic cycles. Due to weak growth along with muted pressures of inflationary, the need for removal of accommodation space is becoming more modest.
  • In 2019, the Federal Reserve of the US is expected to raise the rates by more than three times to that of previous years. Many of the other central banks which include the likes of England, Canada along with several other emerging banks like Russia, India and Brazil are also expected to increase interest rates. The central bank of Japan and Europe are not expected to raise their rates anytime soon before 2021.
  • The bank of Japan is not going to end the policy of providing negative interest rates before the end of 2020. Amongst other major banks, the one from China is moving in a totally separate direction and providing a very modest stimulus rate.
  • US growth trends are predicted to top the chart of the global economy in 2019. The recent calming down of forex markets, relative to several other emerging market currencies are going to have a positive effect on the rise of rates of US dollars. Added to this due to the potential increasing rate of volatilities and other uncertainties of Europe, the US dollar rates are likely to grow.
  • Mistakes of policies are also a significant threat to global economic charts of 2019. The ongoing trade conflicts are taking a very serious turn and turning out to be alarmingly dangerous, not because they have already damaged the economy, but because there are vast chances of such loss.
  • Increasing of debts, coupled with budget deficits in Europe, Japan and US along with potentially wrong steps have posed threats to a lot of global economic principles the only positive news is that the risks of high damage related to these issues are on a shallow scale therefore even if it turns out to be the worst-case scenario, there won’t be huge losses or recessions incurred. If these issues are not addressed quickly, there will be a chance of enormous failure 2020 and beyond.

Government bodies in power are not working with a professional outlook. There are co0nstant tussles between the government officials and populists. Most of the authoritarians who are in the ruling party are flouting their powers and fraying international relations. Some of the biggest risks on the political perspective in 2019 are stated out below:

  • Impending horrors of trade wars are growing significantly. With the advancement of technological fronts and military expansion in China to subdue North Korean sanctions are posing big threat to the world economy.
  • The populist government of Italy is in a constant tussle with Brussels due to their schemes on spending sprees, which has progressively unnerved many investors. In the coming few years, the administration bodies power will be on stake, based on the ability of the EU to rightfully impose various budget disciplines.
  • The ongoing tension between various ruling partners in coalition includes Five Star anti-establishment movements as well as the league for anti-migration. The direction in which the parties are headed all signs indicate a collapse in administration in the next few months. Even if the government would be flexible enough to ward off the political bouts, the financial sectors of Italy will endure great loss.
  • Due to Brexit, the political landscape of Britain is already in shambles. This has obscured the path of nations exit from the EU. Even in situations of fluidity, the risks loam around the changes in Prime Ministerial positions and the government bodies remains very high. Due to the non-significant Brexit deals, the GDP of the British government is lower than 7% as predicted for the next few years. Even though UK remains a part of the Brexit deal, there will still be no progressive improvements in the economy.
  •  The House of Representatives is heading towards taking over the democratic house run by Donald Trump’s government. This will cripple down the political agendas of the ruling house which will be the opening gateways for Trump’s exit presidential campaigns and the vast family business empire o his.
  • The Representatives could further launch an investigation to scrutinize the various international policies of the ruling government to expose the possibilities of any scams. Thus, there won’t be any significant policies framed in the next two or three years, so the chances of tax cuts would be bleak.
  • Even the promised increase in spending infrastructure would not be evident due to the regularity of periodic dramatic bouts which eventually could shut down the entire government.
  • In various emerging economies of the world, elections will take place which will not lead to stability anytime soon. Nations like Indonesia, India, Nigeria, South Africa and Argentina are those which are headed amongst polls. Voters are more concerned abiu the economy of their counties more now than ever.  They are making strict decisions and voting for the parties they wish to continue the progress of the country.
  • Losing streaks of oil industries have put the politics of the Middle East into the spotlight. US’s relation with Iran holds the key. The breaking of the alliance will lead to cutting off the output of various allies. The relation between Saudi and US are also under scrutiny due to the murdering of US columnist Jamal Khashoggi. Due to the probabilities of jeopardizing the relationships, oil prices are expected to go off the roof.
  • North Korea is posing a big threat to the world economy by halting the East Asian waterways routes which could have the biggest and most sustainable routes of the region. With the aid of Taiwan, the US is looking forward to boosting navigation exercises many in the South China Sea, but due to risks of miscalculations, the relationships with China may falter.
  • Due to the action of terrorist organizations, the treats of cyber attacks are larger than ever before. There were more than 10, 9000 terrorists’ attacks in 2017 which had killed an estimated 26,400 people. This impending threat could definitely bring down the house and crumble economic charts.

Author Bio:

Michelle Johnson is a renowned professional in the field of economics and educates children with an interest in this field. Her methodologies and friendly behavior make her an instant favorite amongst students of several age groups. The positive attitude that she imbibes has improved her reputation amongst her students. She has got an MBA degree along with six years of professional teaching experience.