IN THIS ISSUE:
1. The Global Economy is the Weakest Since 2008-09
2. Momentum Easing Across World’s Major Economies
3. IMF Warns: “No Deal” Brexit Will Hurt Global Growth
4. Economists: Worst May be Over For Global Economy
Global economic growth contracted sharply in the second half of last year, from above a 4% pace in the first half to 2-2.5%. While still positive, momentum eased across all of the world’s major economies, including the US. The question is, will this global slowdown continue?
Fortunately, a growing number of forecasters believe the global economy is in the process of bottoming and predict it will strengthen considerably in the second half of this year. Let’s hope they are correct.
I also discuss “Brexit” involving the UK and the EU, which was nearing its March 29 deadline until the British Parliament extended it last Thursday. I will point out what you should be watching for in the negotiations just ahead, and I also suggest that Brexit may not be nearly as big a deal as the media would have us believe.
The Global Economy is the Weakest Since 2008-09
While the US economy grew at nearly 3% in 2018, its best showing in years, global economic growth lost considerable momentum in the second half of last year. While the International Monetary Fund (IMF) has yet to release its final estimate of global GDP for all of 2018, most forecasters believe the global economy slowed significantly in the second half of last year.
According to the IMF, the global economy was growing at a healthy rate of just over 4% in the first half of 2018. However, recent estimates from Bloomberg and some multinational banks suggest that global growth contracted significantly in the second half of last year to only 2-2.5%. If so, that would mean growth slowed to the lowest level since 2008-09 during the Great Recession.
On January 21, the IMF revised its global economic growth forecast for 2019 down to 3.5%, citing concerns about rising trade tariffs between the US and China and weakening in the European economy in the last half of 2018. It will not surprise me if the IMF cuts its global growth forecast more just ahead.
Here’s why: If global growth was in fact 4.1% in the first half of 2018 as the IMF believes, and if it did slow to only 2-2.5% in the second half of last year, that’s still average growth of over 3% for the year. But if growth did slow to near 2-2.5% in the second half of last year, that will mean there will have to be a substantial rebound to come anywhere near the IMF’s global growth forecast of 3.5% for 2019.