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20.04.2019 18:11 World Economy Review - March 2019

The International Monetary Fund cut its outlook for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade.

The world economy will grow 3.3 percent this year, down from the 3.5 percent the IMF had forecast for 2019 in January, the fund said in its latest World Economic Outlook. The 2019 growth rate would be the weakest since 2009, when the world economy shrank. It`s the third time the IMF has downgraded its outlook in six months.

“This is a delicate moment” for the global economy, Gita Gopinath, who recently became the IMF`s chief economist, said at a press briefing in Washington. A projected pickup in growth next year is precarious, she said.

The global volume of trade in goods and services will increase 3.4 percent this year, weaker than the 3.8 percent gain in 2018 but reduced from the IMF`s January estimate of 4 percent, the fund`s report showed.

Global economic growth will recover in the second half of this year, before plateauing at 3.6 percent from next year, according to the Washington-based fund. A series of encouraging developments have boosted optimism about the world economy in recent weeks, including the decision of the Federal Reserve to put interest-rate hikes on hold and encouraging data from China`s manufacturing sector and the U.S. job market.

Still, the IMF is warning that risks are skewed to the downside, with a range of threats menacing the global economy, including the possible collapse of negotiations between the U.S. and China to end their trade war, and the departure of Britain from the European Union without a transition agreement, known as the “no-deal” Brexit scenario.

“Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority,” the IMF said.

IMF Managing Director Christine Lagarde is warning that the world economy faces a “delicate moment”. While intense trade talks between the U.S. and China have raised expectations of a lasting truce between the world`s two-largest economies, analysts remain worried about the strength of the global economy, a decade after the financial crisis. Lagarde said the fund doesn`t anticipate a recession in the near-term.

The fund cut its forecast for U.S. growth to 2.3 percent this year, down 0.2 percentage point since the IMF`s last global outlook in January. The downgrade reflects the impact of the partial government shutdown that ended in January, as well as lower-than-expected public spending. The fund upgraded its U.S. forecast next year to 1.9 percent, up 0.1 percentage point, on the Fed`s shift to a more patient stance on interest rates.

The IMF slashed its outlook for the euro area to 1.3 percent this year, down 0.3 point from three months ago. Growth is expected to be softer in several major European economies, including Germany, where weak global demand and tougher car-emission standards have hit factory production. Weak domestic demand and high sovereign-debt spreads have dimmed Italy`s outlook, while street protests in France weighed on growth, the fund said.

The IMF cut its outlook for U.K. growth to 1.2 percent this year, down 0.3 point from three months ago. The IMF raised its forecast for Chinese growth by 0.1 point to 6.3 percent this year, while lowering its projection for growth in Japan by 0.1 point to 1 percent. The fund cut its outlook for India`s growth this year to 7.3 percent, down from 7.5 percent in January.

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23.03.2019 02:10 World Economy Review - February 2019

Annual global economic growth is forecast to decelerate to 3.5 per cent in 2019 and 2020, down from 3.7 per cent in 2018, said London-based Euromonitor International, a global market research company in a new report.

This deterioration in its global outlook has primarily been a result of downgrades to the advanced economies, including the US and the Eurozone, but also to some emerging economies such as Mexico and Russia, according to the report titled “Global Economic Forecasts Q1 2019”.

The real GDP in advanced economies is estimated to grow by 2.0 per cent in 2019 and 1.7 per cent in 2020, a decline from 2.3 per cent growth in 2018. Emerging economies are anticipated to see a steadier real GDP growth of 4.6 per cent in 2019 and 4.7 per cent in 2020, which is similar to a pace of 4.6 per cent in 2018.

The world trade growth is likely to weaken in 2019 as a result of a pullback in globalisation and increasing political risks, the report said.

The recent decline in financial asset prices also suggests a risk of recession in 2019. Major global risks are stemming from remaining trade war uncertainty, tightening financial conditions and risks of a worse-than-expected Chinese economic slowdown.

The Eurozone outlook is also clouded by a possibility of a no-deal Brexit and Italian fiscal policy. Lower oil prices and the emergence of populist leaders in Latin America could further weigh on the outlook of emerging economies.

Worsening trade and political uncertainty along with a more transitory impact of tax cuts has led Euromonitor International to reduce the US real GDP growth forecast to 2.4 per cent in 2019 and 1.7 per cent in 2020, it said in the report.

Negative readings at the end of 2018 have led to downgrades in the Eurozone outlook, with the economy slowing close to long-term trend growth. Real GDP is to grow by 1.7 per cent in 2019 and 1.6 per cent in 2020.

The UK outlook remains under severe Brexit uncertainty. “We have kept our baseline real GDP growth at 1.5 per cent in 2019 and 1.4 per cent in 2020. However, the baseline is just one of several possible scenarios,” Euromonitor International said.

Slowing global demand and the China-US trade war continue to take a toll on Japan’s economy, GDP growth declined in Q3. Euromonitor International has reduced real GDP growth to 0.6 per cent in 2019 and 0.6 per cent again in 2020.

China is facing growing concerns about a domestic demand slowdown and the impact from the US-China trade war. “We have for now kept GDP growth forecasts at 6.1 per cent in 2019 and 5.9 per cent in 2020,” the report said.

Brazil’s business confidence has jumped on the new president’s reform agenda. While waiting for the government’s actions, Euromonitor’s real GDP growth forecast is unchanged at 2.2 per cent in 2019, 2.4 per cent in 2020.

Russia’s economic growth will be weighed down by slowing exports, weak domestic demand and decreasing oil prices. Euromonitor International has cut the real GDP growth forecast to 1.3–1.4 per cent in 2019-2020.

India’s economy decelerated slightly in Q3 2018, dragged down by private consumption and net exports. Euromonitor International has reduced real GDP growth forecasts to 7.4 per cent in 2019 and 7.5 per cent in 2020.

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21.02.2019 13:26 World Economy Review - January 2019

The world economy is headed for a period of "dull, low" growth, according to fund manager Janus Henderson, but the risk of an outright recession remains small.

Market participants are increasingly worried about the prospect of a serious economic downturn this year.

A long-running U.S.-China trade war and uncertainty around the U.K.`s exit from the European Union has soured business and consumer sentiment in recent months.

Most economists, as well as some the world`s business elite, agree that economic growth is slowing but policymakers have expressed some hope for a soft landing rather than a full-blown recession.

"There is definitely a slowdown in the momentum of the global economy. I don`t think the economy is going to be as strong as it was last year," Jane Shoemake, investment director of global equity income at Janus Henderson Investors, told CNBC`s "Squawk Box Europe" on Monday.

"Our central forecast is not for a recession… It is just for dull, low growth," she added.

In contrast, Nobel Prize-winning economist Paul Krugman warned earlier this month that there is a significant chance the world economy is headed for a recession either later this year or early next year.

Krugman warned there is "quite a good chance" of a recession in 2019, adding he was worried economic policymakers "do not have an effective response" if the economy slows down.

At the start of February, the European Commission sharply downgraded its forecast for euro zone economic growth in 2019 and 2020.

The Commission said euro zone growth will slow to 1.3 percent this year from 1.9 percent in 2018 and is expected to rebound in 2020 to 1.6 percent.

The estimates were markedly less optimistic than the EU executive`s previous forecasts, exacerbating fears that a global economic downturn is spreading to Europe.

An economic downturn in China, the world`s second-largest economy, has heightened concerns of a global recession but Europe has been the "real disappointment," Shoemake said.

"We have had a massive change in what expectations are for the Federal Reserve and so if they don`t raise any further, dividend yields (regular payouts from a stock) are going to look very attractive because bond yields are not going to be moving any higher particularly," she added.

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22.01.2019 11:24 World Economy Review - December 2018

The World Bank has revised its global GDP growth outlook for 2019 0.1 percentage point downward.

In its semi-annual “Global Economic Prospects” report, the World Bank says global economic growth is projected to soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook.

In 2020 and 2021, the global economic growth has been forecast at 2.8 per cent each year, 0.1 percentage point lower than earlier projections.

“International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures," the WB says.

Worries over trade war, weak global growth and financial stress in the developing economies are likely to weigh on global growth outlook, bank said.

The World Bank left the 2019 growth forecast for developed economies and for the United States unchanged at 2 percent and 2.5 percent, respectively. The 2019 forecast for the euro area was lowered by 0.1 percentage points to 1.6 percent.

The World Bank downed its US GDP growth outlook for 2020 by 0.3 percentage points to 1.7 percent.

Chinese GDP growth forecast was downed by 0.1 percentage points to 6.2 percent in 2019 and left unchanged at the same 6.2 percent in 2020.

The bank kept its December forecast for Russia`s GDP for 2019 and 2020 at 1.5 percent and 1.8 percent, respectively. After two years of decline brought by Western sanctions and a collapse in global oil prices, Russia`s economy returned to a growth rate of 1.5 percent in 2017.

“In Russia, growth has been resilient, supported by private consumption and exports,” the World Bank writes in a report. “However, momentum has slowed, reflecting policy uncertainty, recent oil price declines, and renewed pressures on currency and asset prices.”

India`s GDP is expected to grow at 7.3 per cent in the fiscal year 2018-19, and 7.5 per cent in the following two years, the World Bank has forecast, attributing it to an upswing in consumption and investment. The bank said India will continue to be the fastest growing major economy in the world.

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18.12.2018 12:27 World Economy Review - November 2018

The Organization for Economic Co-operation and Development (OECD) warned about a slowdown in global economic growth for 2019 and urged countries to prepare for difficult times.

In its semi-annual report, the Paris-based entity cut its growth forecast for next year by placing it at 3.5 percent, four-tenths less than in June, when the forecast was 3.9. Also, for this year the forecast remained the same at 3.7 percent.

The OECD warned that the world economy will suffer a slowdown from next year, as a result of several factors among which stand out trade tensions, the rise in oil prices and uncertainty related to ongoing processes such as the departure of the United Kingdom from the European Union (Brexit).

The Paris-based entity said that while labour markets are in good health in major economies like the US, trade and investment have taken a hit from higher tariffs. "Trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive," OECD chief Angel Gurria said.

A full-blown trade war and the resulting economic uncertainty could knock as much as 0.8 percent off global gross domestic product by 2021, the OECD estimated.

According to the report, the Eurozone will only grow this year by 1.9 percent and the next by 1.8, which means one tenth less in each period. In Britain, the OECD forecast growth would pick up from 1.3 percent this year to 1.4 percent in 2019.

Though at the source of the current tensions, the US economy was expected to fare better than most other major economies. The OECD`s 2018 and 2019 forecast for the US remained unchanged. The United States will advance 2.9 percent in 2018 and 2.7 percent in 2019. It said growth in the world`s biggest economy would slow from nearly 3.0 percent this year to slightly more than 2.0 percent in 2020.

Trimming China`s forecast, OECD said its growth would slow from 6.6 percent in 2018 and 6.3 in 2019 to a 30-year low of 6.0 percent in 2020 in the face of higher US tariffs.

It warned that "a much sharper slowdown in Chinese growth would damage global growth significantly, particularly if it were to hit financial market confidence".

In the Latin American region, the organization predicted a three-tenths growth cut in Mexico for the two years, with which the forecast for 2018 stands at 2.2 percent, and that of 2019 at 2.5.

For Brazil, it also predicted a setback, with an advance of 1.2 percent this year (eight tenths less) and 2.1 next year (seven-tenths less). In the case of Argentina, the country is expected to enter into a recession as the Gross Domestic Product will fall by 2.8 percent this year and 1.9 percent in 2019.

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