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December 27, 2019

Global Economy: Hope floats

  • The United States (US)-China trade war showed some headway with an agreement on a phase one trade deal
  • The Conservative Party win in the United Kingdom (UK) reduces the risk of a no-deal Brexit
  • China promised to maintain stable growth by effective policy implementation and fiscal support

A partial trade deal between the US and China and headway in seemingly never-ending Brexit imbroglio. Two of the biggest uncertainties that shattered business confidence and impacted global growth, seem to be finally getting resolved as the year draws to a close. Things seem to be looking up as we head into 2020.


Even though all the details of the US-China trade deal are still unknown, the “phase one” agreement does look like a step towards easing the trade tensions between the two nations, for now. They have been at loggerheads with each other for the past 18 months, doing extensive damage not only to their own economies but also to business and investment globally. The other significant event is the majority win by Prime Minister Boris Johnson’s Conservative Party in the UK. According to S&P, the new government's stronger mandate to progress through the next stage of Brexit negotiations reduces the potential for a disruptive no-deal departure. This means that the UK leaves the European Union (EU) by the end of January 2020, and then negotiations on the future relationship between the two will start. S&P also raised the UK’s sovereign rating outlook to ‘stable’, from 'negative' after Conservative election landslide.


It remains to be seen how these two developments impact global growth going ahead. However, they are steps in the right direction to lift sentiment, a precursor to reviving growth.