LONDON, Feb. 7, 2019 /PRNewswire/ --
In December 2018, CRU conducted their annual macroeconomic survey of clients' views for 2019. The survey highlighted that we enter 2019 with greater uncertainty and pessimissim than 2018 – a sentiment that was also echoed in this year World Economic Forum in Davos.
It reports clients' view on the key global downside risks. Two things stand out: the share of clients seeing downside risks has increased – the 2019 figures are larger than 2018; and the main worry comes from potential slowdowns in US and China, as well as the ongoing trade conflict between them. Overall CRU found strong consensus across different geographic locations. The rest of this insight provides more detail on each of these issues.
Global growth expected to be slower in 2019
In the strongmen era of Trump and Xi Jinping, predicting the future is becoming more challenging. Much of the Asian market has been shaken by unpredictable dynamics and tension between the world's two largest economies, the US and China. Populism and nationalism have been on the rise in Europe, with Brexit and fraught agreement of Italy's budget, have created uncertainty in financial markets and global business has taken a hit.
CRU estimates the economy grew by around 3.0% in 2018, and it is expected to slow to 2.7% in 2019. This is in line with client expectations, where 58% of CRU's survey respondents anticipate economic growth to be slower than 3% in 2019 whilst 33% expect economic growth to "stay the same". Participants in the Asia region showed the most concern with 75% anticipating slower economic growth in 2019. This is not surprising considering their proximity to China, which has once again emerged as a key focal point for the macro picture in the coming year.
Policy drives the key risks in 2019
At the time of writing, Presidents Trump and Xi have put their bilateral trade war temporarily on pause. Both presidents came to an agreement after the G20 meeting in late November to hold tariffs at 10% on products worth $200bn after 1st January 2019, rather than raising them to 25%. Until 1 March (when 90-day truce ends) progress on the trade talks will be monitored closely.
To assess both upside and downside risks in 2019, CRU asked their clients to choose up to three different events that they saw as most likely to impact global growth in 2019. The trade war and prospects in China is where the greatest concerns lie, and it is also where there is the greatest potential for upside news. This can be seen in the chart below, where the response on the trade war and China growth are almost mirror images of each other. The main downside risk to global growth arises from additional tariffs, this was cited by 70% of respondents. On the flip side, 57% of respondents believe that US could lessen protectionist measures, providing upside potential for growth in the world economy this year. Interestingly, the upside was most prominent from clients in the Americas region at 69%.
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