UN lowers global economic growth forecasts for 2019-2020
UNITED NATIONS (AP) — The UN says it is lowering its forecasts for global economic growth in 2019 and 2020 as a result of high trade tensions, uncertainty over economic policies and softening business confidence.
In its mid-year report Tuesday on economic prospects, the UN said that following an expansion of three percent in 2018, the world economy is now projected to grow 2.7 percent in 2019 and 2.9 percent in 2020. UN officials had projected three percent growth for both years in its January forecast.
The new report says the growth outlook in all major developed countries and most developing regions has weakened due to both domestic and external factors.
UN chief economist Elliot Harris said that “more comprehensive and well-targeted policy responses are needed to tackle the current growth slowdown.”
Meanwhile, a collapse of US-China trade talks and hike in tariffs on Chinese goods would push the world economy towards recession and see the Federal Reserve cut US interest rates back to zero within a year, analysts at Morgan Stanley said on Monday.
While a temporary escalation of trade tensions could be navigated without much damage at all, a lasting breakdown would inflict serious pain.
“If talks stall, no deal is agreed upon and the US imposes 25 percent tariffs on the remaining circa $300 billion of imports from China, we see the global economy heading towards recession,” the bank’s analysts said in a note.
In response, the Fed would cut rates all the way back to zero by spring 2020 while China would scale up its fiscal stimulus to 3.5 percent of GDP (equivalent to around $500 billion) and its broad credit growth target to 14 to 15 percent a year, they added.
“But, a reactive policy response and the usual lags of policy transmission would mean that we might not be able to avert the tightening of financial conditions and a full-blown global recession.”
A global recession is defined by growth dipping below the 2.5 percent a year threshold.
In a middle scenario where 25 percent tariffs on $200 billion of US imports from China stay in place for three to four months, global growth could slow around 50 basis points to 2.7 percent a year. –