The economic growth outlook for 2019 has dimmed for the first time based on a new poll with US-based economists. The escalating trade war between the US and China and tightening monetary policies have been cited as two of the biggest risks to long-term growth. At the beginning of the year, there was a lot of optimism that the global economy would soar robustly in 2018 and in 2019. But this sentiment has changed now.
It’s important to note that these predictions are not entirely based on any real data. It’s basically the opinions of top economists polled by Reuters on a regular basis. The Reuters poll involved 500 top economists who were asked to give their outlook on a number of economies across the world. The survey generally tracked 44 major economies including the US. But despite the lack of real data on the economy, the poll is seen as a very credible indicator of economic conditions.
In this recent survey, the economists downgraded the outlook of 18 out of the 44 economies tracked. 23 of the remaining countries remained unchanged. Only three of economies tracked were able to get a marginal upgrade in the outlook. The survey also showed that until now, growth in at least 70% of the economies tracked has peaked. But the growing economic risks may hamper any momentum moving forward. Economists also noted the emergence of a new dynamic in the global economy that has not been seen in a while. The US economy, which has traditionally been a slow and steady growth economy, is now booming. However, other countries that have traditionally grown very fast such as China are now slowing. This is the first time that this has been observed in a long time.
The US Federal Reserve has been raising interest rates to try to prevent the US economy from overheating. This is also having a negative ripple effect in other emerging markets. The recent change in global economic outlook comes barely days after the much-publicized financial market selloff which is another worrisome factor that could indicate that investors are growing wary of the trade risks caused by the US-China trade war.
The Trump administration has threatened to impose duties on $267 billion worth of Chinese goods. The White House had already levied additional tariffs on $250 billion worth of goods. China has also fought back by targeting US farmers. Experts warn that this escalation will lead to increased volatility in the US and Chinese financial markets. In addition to this, as the cost of goods increases, purchasing power will decline and consumer markets will crumble under the pressure.
The trade war escalation may also affect production or input costs leading to lower profits for businesses on both sides of the isle. All these factors may have dire effects on the global economy in the long run. Nonetheless, the US economy is expected to maintain its steady growth but it may be very difficult to sustain it in 2019 if the overall risk factors don’t ease off before the year is out.