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World Economic Prospects Monthly
Publication year - 2018
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/1468-0319.12385
Subject(s) - recession , economics , momentum (technical analysis) , liberian dollar , china , emerging markets , global recession , great recession , consumption (sociology) , financial crisis , great moderation , medium term , business cycle , monetary economics , macroeconomics , keynesian economics , financial economics , finance , geography , social science , archaeology , sociology
Overview: A solid 2019, despite the soft end to this year▀ While the global economy looks set to end this year on a soft note, we still see the expansion regaining some momentum in 2019 and attach only a 5% probability to a global recession next year. Overall, we still see global GDP growth slowing to 2.8% in 2019 from 3.0% (0.1pp lower than last month) in 2018. ▀ The Q3 GDP figures from the advanced economies made fairly dismal reading. Admittedly, US growth only slowed marginally on a quarterly basis, and remains comfortably above potential, but Germany, Japan and Italy, among others, all contracted. Nonetheless, apart from Italy, these contractions appear to be explained by one‐off factors – as a result, we see growth rebounding in Q4, with only Italy entering recession. This is supported by the recent stabilisation of composite PMIs after their slide in Q3. ▀ China has also slowed and a further loss of momentum is likely in the short term as the effects of recent policy loosening take time to filter through to the real economy. Emerging market GDP growth has softened too and the generalised tightening in financial conditions suggests that the slowdown may continue. ▀ But the US and China slowdowns reduce the risk of destabilising imbalances building that would add to medium‐term downside risk. US growth is also likely to remain above trend and thus broadly supportive for the global outlook. A silver lining to US growth moderation may be a weaker US dollar – we expect the euro to rise to $1.20 by end‐2019 – which would, other things being equal, support global trade and should also boost EM growth via financial market and financial balance sheet channels. ▀ Finally, the oil price plunge over recent months may provide a fillip for global growth via lower inflation. We now expect the oil price to rise gently in 2019 to about $65pb by year‐end, well below our previous forecast of $73pb. Not only will this boost households' real incomes, but it may also temper central banks' plans to raise rates.