Summary

The slowing momentum in the world economy continued in the last quarter of 2018, with some of this weakening trend likely to spill over into 2019. The forecast for global economic growth in 2019 has been revised downward to now stand at 3.3%, following growth of 3.6% in 2018, due to factors including the slowing pace in the Euro-zone and to a lesser extent that of the US, ongoing challenges in emerging and developing economies and a slow-down in global trade. However, some recent positive developments could support the global economy at its current level, including the recovery in oil prices, possible progress in
US-China trade negotiations and less-ambitious monetary tightening by the US Federal Reserve. Nevertheless, this would not lift the global economy beyond the growth forecast.

In the OECD, the divergent growth trends have become even more accentuated. Momentum in economic growth in the US continues, albeit at a slowing pace. Underlying growth has been recently impacted by ongoing political challenges and trade frictions. Consequently, the 2019 growth forecast for the US was lowered to 2.5%, after estimated growth of 2.9% in 2018. Compared to the stronger momentum in the US, Euro-zone growth is forecast to continue to slow further this year. Euro-zone growth in 2019 has been revised down to 1.3%, following growth of 1.8% in 2018. The growth forecast for Japan remains unchanged at 1.0% for 2019 and 0.8% for 2018. However, further downside risks remain to the OECD growth forecast, which now stands at 1.9% for 2019, after 2.3% in 2018.

In the emerging economies, the growth forecasts remain broadly unchanged. China reported a better than expected growth of 6.6% for 2018, while the 2019 growth forecast remains unchanged at 6.1%. Some upside may come from further fiscal and monetary stimulus. India’s economic growth forecast remains at 7.2% for 2019, following growth of 7.5% in 2018. Growth in Brazil remains at 1.1% in 2018 and 1.8% in 2019. Depending on the policy actions by the new government, as well as commodity price developments, the growth forecast for 2019 may alter. Russia’s growth forecast for 2019 was revised down slightly to now stand at 1.6%, the same level as in 2018.

While the economic growth forecast is now relatively balanced, underlying risks continue. These pertain to ongoing trade tensions, uncertainties in monetary policies and challenges in several emerging and developing economies. Moreover, Brexit, fiscal issues in some EU Member Country economies and Japan’s envisaged sales tax increase pose additional risks. The growth trend in 2H19 remains particularly uncertain as the fiscal stimulus in the US is expected to taper off, China’s slow-down is forecast to continue, issues in the Euro-zone are expected to remain and India will most likely face lower growth levels.