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December 31, 2018

Global Economy: Slow lane ahead

  • The United State (US) trade deficit reached a 10-year high in October, increasing 18.8% on-year, as imports growth outpaced exports
  • Japan's real gross domestic product (GDP) growth for Q3 of 2019 contracted as natural disasters damped private consumption
  • In November, China's trade surplus widened to a 10-month high of $44.7 billion, beating market expectations
  • Crude prices eased 20% on-month in November to average 64.7 per barrel (bbl), compared with $81/bbl in October, due to an increase in inventories

With fiscal stimulus drying out, the US and China engaged in trade brinkmanship, and theeuro zone battling its political-economic bugbears, global growth engine is sputtering. As aresult, GDP growth is expected to slow down in most major economies in 2019. As per S&PGlobal, the US will lead the trend, as fiscal stimulus will wane and monetary policynormalization will continue, both weighing on growth. China's expansion will continue tomoderate, despite the pause in corporate delivering and anticipated policy easing, as theeffects of the ongoing trade tension impact the business and investor confidence negatively.European growth will trundle along, weighed down by concerns about Brexit, Italy's budget,and Germany's new leadership ahead of a reshuffling in European governance. Acrossemerging markets, tech and oil-exporting economies may struggle in relative terms.Moreover, risks are tilted to the downside. The risks include uncertainty about the resolutionof US-China tariff and market turbulence related to the path of interest rate normalization bythe US Federal Reserve.