Wednesday , December 2 2020

Global economy shows signs of slowdown



A few weeks after the International Monetary Fund (IMF) revised its global growth forecasts for the first time in two years, the latest data on the global economy confirmed that the slowdown has begun. In October, the IMF revised its global growth projections to 3.7% from 3.9% for 2018 and 2019, pointing to the risks of creating a new downward revision in the coming months.

A few weeks after the International Monetary Fund (IMF) revised its global growth forecasts for the first time in two years, the latest data on the global economy confirmed that the slowdown has begun. In October, the IMF revised its global growth projections to 3.7% from 3.9% for 2018 and 2019, pointing to the risks of creating a new downward revision in the coming months.

Although it is no surprise that the wider and stronger growth process driven by industrial activity and consumption in the last 24 months has begun to cause some fragilities, the slowdown is expected to happen earlier than expected. The world's largest economy, the US, showed strong growth in the third quarter of this year, but economic activity in China, Japan and Germany (two, three, and four of world economies) is slower than expected.

In the Chinese case, consumption slowed down at its slowest pace since June, confirming what the third quarter GDP data said to us during the month of October: China has been growing at the lowest rate since the financial crisis of the year. 2008-09.

Despite the growing trade tensions between China and the US, the slowdown in the Chinese economy had nothing to do with the export sector. In addition, exports remain strong in the coming months, reflecting higher demand for Chinese products while the US expects an increase in tariffs.

The slowdown in the Chinese economy is entirely related to the domestic factors in which the Chinese government has attempted to restrict the credit to control what the debt bubble in the private sector and parasites might be.

In the case of Japan and Germany, the situation went beyond the deceleration process and entered the contraction zone. As for Japan, the contraction of 1.2% was partly explained by a typhoon that caused interruptions in an earthquake and productive chains, while Germany's economy shrank by 0.8% and was affected by the implementation of new carbon emission standards. Automotive industry affecting production.

Although these transient effects can be reversed in the fourth quarter and the slowdown in China is not new, the threat of further tightening the US trade policy is beginning to affect confidence levels. Similarly, the volatility of return to financial markets in the United States due to high interest rates results in a tightening of financial conditions on a global scale.

Although the American economy continues to grow strongly, most experts expect a slowdown in the first quarter of 2019, which will deepen towards the second half of the year.

Although the probability of a global recession scenario in the short term is low, there is a greater dynamism in the global economy.


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