September 26, 2018//-Although global economic growth will remain resilient this year mainly due to an outstanding half first (H1) 2018 performance, dark clouds have begun to swell above the global economy, according to FocusEconomics, a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas.
In its October 2018 estimate released this month, the report attributed it to: “Escalating trade tensions between the United States and the rest of the world, especially China, represent the main downside risk to the global economic outlook next year”.
It added: “Moreover, although the global economy has been supported by stellar dynamics in the U.S. due to brash government spending and tax cuts, fiscal tailwinds will start to wane next year, which could lead to a sizable deceleration in the world’s largest economy”.
Despite an uncertain economic outlook, the Federal Reserve has continued to tighten its monetary policy and another rate hike is already penciled in for September.
Higher interest rates in the United States are fueling volatility across the global financial markets and have triggered capital outflows from emerging markets.
In Europe, populism is still on the rise, while the long-awaited Brexit deal is still not in sight.
Economists at the FocusEconomics noted China, which has been a key engine of the global economy over the past few decades, is facing severe challenges such as aggressive financial deleveraging and spillovers from the trade war with the United States.
FocusEconomics Consensus Forecast panelists expected the global economy to expand 3.4% this year, which, if confirmed, would represent the strongest expansion in seven years.
“Panelists see global growth decelerating to 3.2% next year, which is unchanged from last month’s estimate. This month’s unrevised 2019 growth prospects for the global economy is the result of stable economic outlooks for the Eurozone and the United Kingdom”.
Meanwhile, Canada, Japan and the United States saw upward revisions to their growth forecasts.
The Asia (ex-Japan) region is starting to feel the pinch from rising trade disputes, cooling growth in China and financial volatility, which is dragging on the region’s economic outlook for next year.
Growth estimates for Eastern Europe are under strain owing to slowing growth in the European Union—a key trading partner— heightened volatility in the financial markets and fading fiscal stimulus in some large economies, including Turkey.
While the economic outlook for Latin America for this year remains dim, next year growth should pick up as the economic recovery strengthens in key countries, especially Brazil.
Despite higher oil prices, mounting geopolitical risks continue to dent growth prospects in the Middle East and North Africa.
The economic recovery in Sub-Saharan Africa will gather steam in 2019 due to stronger performances by heavyweights Nigeria and South Africa.
African Eye Report
