The word resilience is not new, but it has become fashionable in recent years. According to the Royal Spanish Academy, this term refers to the “ability of a material, mechanism or system to recover its initial state when it has ended the disturbance to which he had been subjected”. A meaning that might well be associated with the global economy. The growth forecast for 2019 is 3%, the lowest level since the start of the financial crisis. The slowdown is evident —in 2017 the advance was 3.8% and in 2018 of 3.6%— and to a certain extent understandable: the final phase of a long cycle of expansion will have added burdens geopolitical depth. However, almost no one can get a glimpse of a recession on the horizon; quite the contrary, the consensus of analysts suggests that in 2020, as the pulse tariff go atemperándose, there are options to attend to a moderate acceleration. The last update of the forecasts of the International Monetary Fund (IMF) calculated a preview of the global GDP of 3.4% in the next year.
“although the indicators of industrial show an incipient improvement, growth will remain modest. The maturity of the economic cycle as well as the high indebtedness and fiscal deficits limit the potential of recovery,” says Joan Bonet, director of markets strategy of Banca March. This view is shared by Nannette Hechler-Fayd”herbe, head of global analysis at Credit Suisse: “we expect economic growth to be moderate, a continuation of liquidity conditions favourable, and a relaxation of geopolitical tensions. As a decrease in the trade war between the US and China should improve the confidence of businesses”.
The possibility of a recession is not contemplated in the medium term
One of the mattresses up with the world economy are the central banks. In 2019, both the Federal Reserve (Fed) and the European Central Bank (ECB) had to step back in the leaf of route that they had designed and which had the aim of normalizing interest rates. The picture is dark at times and had to draw again the hose of liquidity. The effects of these stimuli should be extended to the new year. “We see an inflection point in the global economic growth during the first half of 2020. The impact of such a relaxation in the financial condition arrives with delay to the real economy, but on this occasion the time lag is greater because of the protectionist policies,” said the expert of BlackRock, in its outlook report.
Seven factors that explain
the current economic climate
and its evolution in 2020
the global economy has The lowest growth since he came out of the crisis.
GDP Growth
World
China, euro area, Japan and the U.S.
forecasts predict a slight improvement at the global level
4,5 (%)
4
3,5
3
Estimate
2,5
2011
13
15
17
19
21
2024
One of the main obstacles to the productivity and trade in the last two years has been the pulse of tariffs between the U.S. and China.
global Data
industrial Production
Trade
Beginning of the trade war US-China
7 (rate year-on-year, in %)
5
3
1
-1
2015
2016
2017
2018
2019
Source: International Monetary Fund,
IMF and Bloomberg.
THE COUNTRY
Seven factors that explain the time
economic current and their evolution
by 2020
the global economy has The lowest growth since he came out of the crisis.
GDP Growth
World
China, euro area, Japan and the U.S.
forecasts predict a slight improvement at the global level
4,5 (%)
4
3,5
3
Estimate
2,5
2011
13
15
17
19
21
2024
One of the main obstacles to the productivity and trade in the last two years has been the pulse of tariffs between the U.S. and China.
global Data
industrial Production
Trade
Beginning of the trade war US-China
7 (rate year-on-year, in %)
5
3
1
-1
2015
2016
2017
2018
2019
Source: International Monetary Fund,
IMF and Bloomberg.
THE COUNTRY
Seven factors that explain the economic moment current
and its evolution in 2020
One of the main obstacles to the productivity and trade in the last two years has been the pulse of tariffs between the U.S. and China.
the global economy has The lowest growth since he came out of the crisis.
GDP Growth
global Data
World
China, euro zone, Japan and the U.S.
industrial Production
Trade
forecasts predict a slight improvement to nier world
Beginning of the trade war US-China
7 (rate year-on-year, in %)
4,5 (%)
4
5
3
3,5
1
3
Estimate
2,5
-1
2011
13
15
17
19
21
2024
2015
2016
2017
2018
2019
Source: International Monetary Fund, IMF, and Bloomberg.
THE COUNTRY
interest Rates
The Fed has cut three times the interest rates in the U.S. for 2019, leaving them in the range of between 1.5% and 1.75%, while the ECB maintained the reference rate at 0%. The market does not expect more cuts in the price of money in the two main bodies for money, but neither sees any upward movement of the draft medium-term because the inflation data are still far from being a threat. “Our main scenario envisages that the Fed pause in rate cuts by 2020. In the case of the ECB and the Bank of Japan, we hope to continue with the quantitative expansion and to maintain its policies of zero-interest rate. In general, if 2018 to the major central banks was a year of tightening monetary measures and 2019 for smoothing of the same, we believe that 2020 will be the year in which you make a stop on the way”, pointing from the consulting firm Mercer.
The key vault on which holds out the possibility of an acceleration of global growth in 2020 is the improvement of the business climate. The year that is drawing to a close has been marked by the policy of carrot and stick in the relations between Washington and Beijing. The case, Huawei is the largest example of these tensions. However, in the last few weeks some steps have been taken to remedy the situation. One of them is the signing by the us president, Donald Trump, of the first phase of the agreement with China. As a result of this pact, the US does not applied on the 15th of December, the tariffs were to enter into force (although they do keep existing ones up to that date), while the asian giant will do the same.
The slowdown in China remains soft, but still has not touched ground
“An agreement to reduce or eliminate existing tariffs, and a commitment to stop adding new fees could reduce significantly the uncertainty in the global economy, to release the pent-up demand in investment by companies and to allow Trump to proclaim victory in an election year,” says Mark Haefele, head of the division of high net worth individuals at UBS.
The trade negotiations will continue in 2020, and some analysts advise not to take the bells to the flight. Libby Cantrill, head of public policy of Pimco, one of the largest managers of fixed income in the world, he describes the progress of “truce” weak”. “You can’t deduce that all the uncertainty has been removed following the agreement of the phase one, since it will keep many of the tariffs. In addition, one should be cautious of visualizing future developments, especially taking into account what has been the cost to reach up to the signing of the first phase and that many of the thorniest issues, such as the subsidy to state enterprises, have been postponed to the next rounds of contacts,” recalls Cantrill.
The advanced economies are failing to translate the great liquidity that there is in the prices.
interannual Variation of the CPI
general Index
Underlying (without energy or fresh food)
central banks don’t manage to get inflation to exceed the range of 2%
3 (rate year-on-year, in %)
2
1
0
-1
-2
2015
2016
2017
2018
2019
With prices depressed, the forecasts suggest that interest rates will remain low.
interest Rates
united States
United Kingdom
euro Zone
Some european banks have started to charge for save money
3 (in %)
2
1
0
-1
2019
2020
2021
2022
Source: International Monetary Fund.
THE COUNTRY
The advanced economies are failing to translate the great liquidity that there is in the prices.
interannual Variation of the CPI
general Index
Underlying (without energy or fresh food)
central banks don’t manage to get inflation to exceed the range of 2%
3 (rate year-on-year, in %)
2
1
0
-1
-2
2015
2016
2017
2018
2019
With prices depressed, the forecasts suggest that interest rates will remain low.
interest Rates
United Kingdom
euro Zone
united States
Some european banks have started to charge for save money
3 (in %)
2
1
0
-1
2019
2020
2021
2022
Source: International Monetary Fund.
THE COUNTRY
With prices depressed, the forecasts suggest that interest rates will remain low.
The advanced economies are failing to translate the great liquidity that there is in the prices.
interannual Variation of the CPI
interest Rates
general Index
united States
United Kingdom
euro Zone
Underlying (without energy or fresh food)
central banks don’t manage to get inflation to exceed the range of 2%
Some european banks have started to charge for save money
3 (in %)
3 (rate year-on-year, in %)
2
2
1
1
0
0
-1
-1
-2
2015
2016
2017
2018
2019
2019
2020
2021
2022
Source: International Monetary Fund.
THE COUNTRY
Another soap opera, 2019, the Brexit could start to envision also an exit in the next course, a circumstance that would clear the current uncertainties. The overwhelming victory of Boris Johnson in the recent british elections and the conservative majority in the Parliament, have accelerated the adoption of the law for the exit of the Uk from the European Union (EU), a text that includes the prohibition of further extensions beyond December 2020.
it remains to be seen if in the year remaining until that limit London and Brussels will be able to negotiate a new form of political relationship and commercial. “It is a term too abbreviated to close a multisectoral agreement between the 28 countries, that should be approved also by the respective national parliaments,” said the economists at S&P. The main rating agency in the world believed that the majority obtained by Johnson gives him more leeway to negotiate with Brussels, although he cautions that it cannot be ruled out a Brexit without an agreement. “We think that the Uk could seek an extension of term to the EU. Without this extension the access of uk companies to european consumers would be regulated according to the terms of the WTO on 1 January 2021, which would result in the payment of considerable fees in key sectors such as automotive, agriculture and retail trade. That scenario would hurt the United Kingdom more than to the EU as their trading relationship is asymmetrical,” explain in S&P.
monetary stimuli are to the limit; it is the hour of fiscal policies
the U.S. has been the main engine of the world economy after the departure of the Great Recession. Your economy builds up from 2009, the most expansionary phase of history with 125 months of uninterrupted growth. The giant american with the support of the Fed’s labour market and robust fueling domestic consumption. However, the forecasts of the experts suggest that in the rebound of the global economy, the U.S. should give prominence to other areas such as the EU or the emerging countries. The IMF estimates that in 2020 the US will grow by 2.1% compared to 2.4% estimated for this year.
“the impetus of The tax cuts is fading, the uncertainty associated with the commercial policy seems to be affecting business investment, and labour market indicators appear to be moderating. However, the relaxation of monetary policies and the soundness of the finances of the consumers should avoid the growth of the US to fall too,” says Joseph Little, head of HSBC’s investment Asset Managemet.
In his election year, the u.s. economy will garner the most expansionary phase of the story.
140 (consecutive months of growth)
125
120
120
106
100
80
60
The experts predict that the U.S. is in a phase of slowdown in 2020
40
20
0
1950
1960
1970
1980
1990
2000
2010
2020
All eyes in Europe are directed to Germany to boost its economy with fiscal stimulus.
budget Deficit of Germany
Since 2012 the accounts of German left the deficit
2 (% of GDP)
1
Surplus
0
Deficit
-1
-2
-3
Limit Maastrich: -3%
-4
-5
2008
2010
2012
2014
2016
2018
Source: Renta 4 Banco, Oxford Economics,
NBER, and Bloomberg.
THE COUNTRY
In his election year, the u.s. economy will garner the most expansionary phase of the story.
140 (consecutive months of growth)
125
120
120
106
100
80
60
The experts predict that the U.S. is in a phase of slowdown in 2020
40
20
0
1950
1960
1970
1980
1990
2000
2010
2020
All eyes in Europe are directed to Germany to boost its economy with fiscal stimulus.
budget Deficit of Germany
Since 2012 the accounts of German left the deficit
2 (% of GDP)
1
Surplus
0
Deficit
-1
-2
-3
Limit Maastrich: -3%
-4
-5
2008
2010
2012
2014
2016
2018
Source: Renta 4 Banco, Oxford Economics,
NBER, and Bloomberg.
THE COUNTRY
In his election year, the u.s. economy will garner the most expansionary phase of the story.
All eyes in Europe are directed to Germany to boost its economy with fiscal stimulus.
budget Deficit of Germany
140 (consecutive months of growth)
Since 2012 the accounts of German left the deficit
125
120
120
2 (% of GDP)
106
1
100
Surplus
0
80
Deficit
-1
60
The experts predict that the U.S. is in a phase of slowdown in 2020
-2
40
-3
Limit Maastrich: -3%
20
-4
0
-5
1950
1960
1970
1980
1990
2000
2010
2020
2008
2010
2012
2014
2016
2018
Source: Renta 4 Banco, Oxford Economics, NBER, and Bloomberg.
THE COUNTRY
Enigma electoral
In the equation that manage analysts and managers to get a glimpse of how will the world economy next year, a variable and unpredictable are the elections in the united STATES. The November 3, 2020, the electorate of this country will decide who will occupy the White House until 2024, as well as the formation of the Congress. “With the presidential election hovering on the horizon, will provide turbulence both in domestic policy as in foreign policy, regardless of whether Donald Trump remains in power or make way for democrats. While keeping the truce in the trade war with China, it is very likely to be other issues, like tax reform and competition, which bring volatility,” recalls Michael Lok, chief investment officer of Union Bancaire Privée (UBP).
For its part, China continues with its landing that, even if it is mild, there is still ground. If in 2018, the asian giant grew 6.6%, this year will close with a preview of its GDP of 6.1% and in 2020 the acceleration will slow down to 5.8%, according to the IMF. “It is an important year for China. In 2010, the Government committed to doubling the size of the economy and average incomes by 2020. To achieve these objectives, the authorities will have to ensure at least that the growth is maintained in the symbolic level of 6%. It is possible to further easing of economic policy, ‘ said Keith Wade, chief economist at Schroders.
analysts warn of the impact of the political instability in Spain
In the case of Europe, while the growth by 2020 will be not to throw rockets (1.4 percent, according to the IMF), it will constitute an improvement with respect to the year that is drawing to a close (by 1.2%). The acceleration will come from the hand of Germany, who after a very difficult year for the economy so exporting due to the trade tensions, should benefit from the lower tension tariff. In addition, the rest of community partners will look at with attention, to Berlin if the German Government gives in to the pressure and used its good fiscal situation to stimulate even more growth. “In Europe, the monetary policy has reached its limits and even the most centrist of the governing council of the ECB recognised the undesirable side effects of their policies are not conventional. There is only a margin tax that is relevant in Germany, we believe that in 2020 we will apply the automatic stabilizers, but that the fiscal impulse right will not come until 2021, when the weaknesses of the labour market to start to accumulate”, to recognize at AXA Investment Managers.
One of the main risks to the stability of the world economy is the high degree of indebtedness.
global Debt
Business. non-financial
Governments
Families
the projected Increase in the debt in 2109
0,3 (trillions of dollars)
0,2
0,1
0
1999
2004
2009
2014
2019
Source: Income 4 Bank and IIF.
THE COUNTRY
Scenario more benign
with Europe, the other candidates to lead the acceleration in global growth are the emerging countries, with special attention to Latin america —the forecast suggests an improvement in GDP of 1.8% vs. 0.2%, 2019—. “The cuts in interest rates by the Reserve Federal during 2019 have reduced the pressure on emerging markets, primarily those that depend on funding in u.s. dollars. Thanks to the fact that inflation is falling, central banks in several of these countries would have scope for reducing the price of money”, argue Credit Suisse.
In this board game still riddled with mines, but in principle more favorable than a few months, what can happen with the Spanish economy? Projections suggest that it will continue to the slowdown in GDP growth (1.8% in 2020 compared to 2.1% in 2019), but despite this, Spain should continue to be one of the very first students among the developed countries.
The main risk seen by experts coming from the political side. The negotiation to form a Government had not yet come to fruition at the close of this edition, and, in the case of counting with the support of ERC, the socialists have the intention of leading a project that includes We in the Executive, something that is not very to the liking of the markets. “The new alliance of the left will not be able to count on a stable majority, while the limits of fiscal maneuver in the country will be put to the test. After years above its potential, the growth of Spain is readjusting”, warn AXA.
More pessimistic in relationship with the political instability are at Julius Baer. “The prospect of a weak Government and little favourable to freedom of enterprise has led us to reduce our optimism regarding the Spanish economy. We have recently downgraded the growth forecast for Spain in 2020 to 1.7%”, indicate in the swiss bank. “The expectation of a tax increase could exacerbate this trend, but we remain confident that the increase in wages, the lowering of the debt ratio of families and the ease of access to credit to maintain domestic demand and even rebound. The feeling business also has deteriorated because it expected a fiscal pressure on the companies and higher costs and regulatory”.
As it happens many times, the urgent trumps important. Although the economic forecasts are less dramatic than it was 12 months, on the table is yet to resolve a key issue that will mark the future of the world in the coming decades: how to change the economic model so that it is less polluting, reduce the rates of inequality and be more fair with women.
