NIESR: Global growth to remain at 10-year low in 2020
NIESR Press Release: Global growth to remain at 10-year low in 2020
Global economic growth slowed again last year as increases in tariffs and uncertainty about future tariff impositions and their implications for production activity continued to have negative effects on industrial production, especially in the advanced economies, and global trade.
- With a weaker global economic outlook and continued low inflation, several central banks loosened monetary policy last year and these actions should provide some tailwinds to support global growth this year and into next.
- Despite the stalling activity in global industrial production and trade, the pace of service sector activity has remained robust.
- Our forecasts for global GDP growth this year of 3 per cent, effectively the same as last year, and 3¼ per cent next year are unchanged on three months ago. We expect only a very gradual pick-up in activity as the year progresses, with headwinds to growth and fragility remaining a feature of the global economy.
After two years during which global economic growth has slowed from a cyclical peak in 2017 to its slowest rate since 2009, we expect that the growth slowdown will halt this year. We project global GDP growth of 3 per cent this year and 3¼ per cent next, with these forecasts unchanged from those of three months ago.
Some of the headwinds that have acted to reduce the pace of global economic growth – tariffs imposed by the US and the retaliations to these, the uncertainty created by the re-emergence of tariffs, falling industrial production in the advanced economies, recessions in Argentina and Turkey, and slowing growth in China and India – appear to be weakening. At the same time, monetary policy loosening in a number of major economies, facilitated by continued low inflation, should provide a new tailwind for global growth.
We continue to expect the improvement in global economic prospects to be gradual, not dramatic. With some early economic indicators showing positive movements in recent months, 2020 is expected to be a year in which more positive news on economic growth may gradually start to emerge. We continue to consider that it is more likely that next year will see an increase in the pace of growth than this year. Service sector activity has continued to grow relatively steadily.
On consumer price inflation, with the notable exceptions of Argentina and Turkey, the overall picture is one of relative stability and, in several economies, below target inflation despite a decade-long economic expansion. Although, particularly in the advanced economies, labour markets have tightened with generally faster wage increases, inflation has remained subdued. We expect the wider low inflation picture to hold.
In recent weeks news flows on bush fires in Australia, military tensions between the US and Iran, and the potential effects of the coronavirus have acted as reminders of the uncertainties in the global environment. At the same time, the signing of the Phase One agreement between the US and China on 15 January might lead to some of the uncertainties about a deeper trade war being reduced, although it is evident that there remains a considerable agenda for further discussion. Despite possible downside risks, we expect the decade-long expansion in global activity to continue.
“Below-target inflation has facilitated a loosening in monetary policy at a time of slowing growth. We expect that this loosening, especially in the US and Euro Area, will help to support GDP growth this year and next, and we expect global GDP growth to be about 3 per cent this year and slightly higher next year.” said Barry Naisbitt, Associate Research Director for Global Macroeconomics at NIESR. “Fiscal policy is likely to be the next source of policy impetus for growth if such an impetus is needed.”
Notes for editors:
The full forecast for the global economy will be published in the National Institute Economic Review no. 251 on Thursday 6 February. Details of NIESR’s previous global economic forecast can be found here.
For a full copy of the world economic forecast or to arrange interviews, please contact the NIESR Press Office: Luca Pieri or Phil Thornton on firstname.lastname@example.org / email@example.com / 020 7654 1954 / 07930 544 631
For technical questions related to the forecast, please contact:
- Barry Naisbitt on +(44) 0207 6541951 firstname.lastname@example.org
- Iana Liadze on +44 (0)20 7654 1904 / email@example.com
The National Institute Economic Review is a quarterly journal of NIESR. From this issue the NIER is published by Cambridge University Press (CUP). Founded in 1534, CUP is the world's oldest publishing house and the second-largest university press in the world. The Review is published in February, May, August and November, and it is available from Cambridge University Press here. For enquiries please contact: firstname.lastname@example.org
Latest News from
Policy Exchange - Call for evidence: Building hospitals in the post-Covid era04/08/2020 12:35:00
In the context of the government’s plans to build 40 new hospitals, Policy Exchange is launching a call for evidence to inform a major piece of research into how we should build the next generation of hospitals.
Demos - British public support ban on targeted political ads online04/08/2020 11:35:00
New research has found that calls for greater regulation in political campaigns have a far greater consensus of support among the general public than arguments against regulation.
IFG - Public services were not fit to respond to the coronavirus crisis04/08/2020 10:35:00
Failures in planning and funding cuts meant public services were not well prepared to handle the coronavirus crisis, says a new report from the Institute for Government and the Chartered Institute for Public Finance and Accountancy.
IFS - Geographical inequality in incomes has been falling, but wealth inequalities are rising04/08/2020 09:35:00
The government pledges to ‘level up’ the country and, more recently, the unequal impacts of the COVID-19 crisis have led to an increased focus on inequalities between places as well as between people.
IEA - Furlough scheme changes reflect need to get “back to reality”31/07/2020 16:20:00
Professor Len Shackleton, IEA Editorial and Research Fellow, commented on changes to the furlough scheme effective tomorrow and calls to extend the scheme
UK banks in “fragile state” as Covid crisis beckons, says new IEA research31/07/2020 15:20:00
The Bank of England’s stewardship of the banking system has “turned out to be a disaster, again” say Kevin Dowd and Dean Buckner
IFS - Young people increasingly concentrated in low-paid occupations, and young men increasingly struggling to progress – even before COVID-1931/07/2020 14:20:00
Recent generations have increasingly been starting their careers in low-paid occupations such as bar staff, waiters, call centre workers and kitchen assistants, despite higher education levels.
‘Another interim stop-gap’: The King’s Fund response to NHS People Plan 20/2130/07/2020 11:35:00
Suzie Bailey, Director of Leadership and Organisational Development at The King’s Fund, commented on the expected NHS People Plan and related government announcements