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October 31, 2019

Global Economy: In the slow lane

  • The United States (US) real gross domestic product (GDP) growth in the second quarter (Q2) of 2019 remained unrevised at 2% on-quarter
  • The International Monetary Fund (IMF) lowered the euro area’s (EA) 2019 real GDP growth forecast by 10 bps to 1.2% on account of a 20 basis points (bps) reduction in the growth forecast of Germany, the regions’ largest economy, which is now expected to grow just 0.5% in 2019
  • China’s Q3 growth slowed down to 6.0% from 6.2% in Q2, its weakest quarterly growth rate since 1992

With trade tensions and geopolitical uncertainty taking hold, the global economy seems to be poised precariously on the edge. As evidence of the synchronized slowdown grows, the IMF slashed its 2019 global GDP growth by 30 bps to 3% in its October World Economic Outlook report. This is the slowest pace at which the world economy has expanded since the Global Financial Crisis of 2008- 2009. It is also markedly lower than the 3.8% growth achieved in 2017.


The slowdown is afflicting both the advanced and emerging market economies. The 2019 growth forecast for both were lowered 20 bps to 1.7% and 3.9%, respectively. “Among advanced economies, the weakening has been broad-based, affecting major economies (the United States and especially the Euro Area) and smaller Asian advanced economies. The slowdown in activity has been even more pronounced across emerging market and developing economies, including Brazil, China, India, Mexico, and Russia, as well as a few economies suffering macroeconomic and financial stress,” the IMF noted.


Interestingly, IMF forecasts world growth to rise to 3.4% in 2020 with emerging market economies growing by 4.6% while advanced economies would stay at 1.7%, with a modest pick-up in the euro area offsetting a gradual decline in growth in the US.