THE honeymoon is over, says the former Chairman of US Federal Reserve. According to World Bank, “Global Growth is expected to edge down over the next two years, as global slack dissipates, trade and investment moderates, and financing conditions tighten. Risks to the outlook are tilted to the downside, including the possibility of disorderly financial market movements, escalating trade protectionism, heightened policy uncertainty and rising geopolitical tensions.The International Monetary Fund has also cut its global economic growth forecasts for 2019, saying that trade policy tensions and the imposition of import tariffs were taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows. The IMF said in an update to its World Economic Outlook that it was now predicting 3.7 per cent global growth in 2019, down from its July forecast of 3.9 per cent growth.
According to Goldman Sachs, US economic growth is expected to slow from 2.9% to 2.5% in 2019 due to tighter financial conditions and a fading fiscal stimulus. The forecast also calls for multiple rate hikes as the Fed looks to keep the economy from overheating amid rising inflation and unemployment on a downward trajectory towards 3% by early 2020. The EUROZONE’S 2018 growth forecast was cut to 2.0 percent from 2.2 percent previously, with Germany particularly hard hit by a drop in manufacturing orders and trade volumes. Brazil will see a 0.4 percentage-point drop in GDP growth to 1.4 per cent for 2018 as a nationwide truckers strike paralysed much of the economy. Iran, facing a new round of US sanctions next month, also saw its growth forecast cut, the IMF said. The IMF said the balance of risks was now tilted to the downside, with a higher likelihood that financial conditions will tighten further as interest rates normalize, hurting emerging markets further at a time when US-led demand growth will start to slow as some tax cuts expire. The global economy has recorded a robust two years of synchronized growth, with nearly every nation enjoying an upswing, the IMF said. But, it predicted, that is coming to an end.
The IMF downgraded its forecast for global growth this year and next to 3.7 per cent ,down from 3.9 percent). On top of trade concerns, the IMF also warned that investment in emerging markets has plummeted and that there are great political risks in many nations. East Asia and Pacific: Growth in the region is forecast to ease from 6.3 percent in 2018 to 6.1 in 2019, reflecting a slowdown in China that is partly offset by a pickup in the rest of the region. Growth in China is anticipated to slow from 6.5 percent in 2018 to 6.3 percent in 2019 as policy support eases and as fiscal policies turn less accommodative. Excluding China, growth in the region is forecast to moderate from 5.4 percent in 2018 to 5.3 percent in 2019 as a cyclical economic recovery matures. Indonesia’s economy is expected to grow 5.2 percent rate this year and 5.3 percent the next.
Europe and Central Asia: Growth in the region is projected to edge down to 3.1 percent in 2019 as a modest recovery among commodity exporting economies is only partially offset by a slowdown among commodity importers. In Turkey, growth is forecast to slow to 4.0 percent in 2019. Growth in Russia is anticipated to hold steady at a 1.5 percent rate this year and accelerate to 1.8 percent next year as the effects of rising oil prices and monetary policy easing are offset by oil production cuts and uncertainty around economic sanctions.
Latin America and the Caribbean: Growth in the region is projected to accelerate to 2.3 percent in 2019, spurred by private consumption and investment. The cyclical recovery underway in Brazil is projected to continue, with growth forecast to be above 2 percent in 2019. In Mexico, growth is expected to strengthen moderately to 2.5 percent in 2019 as investment picks up. Growth in Argentina is anticipated to remain subdued in 2019, at 1.8 percent. Growth in some Central American agricultural exporters is expected to pick up in 2019. Economies of the Caribbean are forecast to see a lift to growth in 2019 from post-hurricane reconstruction, tourism, and supportive commodity prices.
Middle East and North Africa: Growth in the region is projected to strengthen to 3.3 percent in 2019, largely as oil exporters recover from the collapse of oil prices. Growth among members of the Gulf Cooperation Council (GCC) is anticipated to rise to 2.7 percent in 2019, supported by higher fixed investment. Saudi Arabia is forecast to expand an upwardly revised 2.1 percent in 2019. Iran is anticipated to grow 4.1 percent in 2019. Oil importing economies are forecast to see stronger growth as business and consumer confidence gets a lift from business climate reforms and improving external demand. Egypt is anticipated to grow 5.5 percent in 2019.
South Asia: Growth in the region is projected to strengthen to 7.1 percent in 2019. Growth in India is projected to advance 7.3 percent in Fiscal Year 2018/19 and 7.5 percent in FY 2019/20. Pakistan is anticipated to expand by 5 percent in FY 2018/19, reflecting tighter policies to improve macroeconomic stability. Bangladesh is expected to accelerate to 6.7 percent in FY 2018/19.
Sub-Saharan Africa: Growth in the region is projected to strengthen to 3.5 percent in 2019. Nigeria is anticipated to grow by 2.1 percent this year, as non-oil sector growth remains subdued due to low investment. Angola is expected to grow 2.2 percent in 2019, reflecting an increased availability of foreign exchange due to higher oil prices, rising natural gas production, and improved business sentiment. South Africa is forecast to expand 1.8 per cent in 2019 due to better business & consumer confidence. Overall, 2019 is going to be a tough year, economically, due to trade wars, political uncertainty, tightening of credit availability and financial crunch.
— The writer is former DG (Emigration) and consultant ILO, IOM.