Around the world, economies are stabilizing. But the trade tension between the superpowers USA and China continues to send ripples in the global economic pond, affecting emerging countries, specifically.
The World Bank has a conservative global market outlook for 2020, which it estimates to be about 2.5 percent. It is not a significant improvement from the post-crisis numbers registered in 2019. Emerging economies are expected to suffer a slowdown at the levels near the global financial crisis beginning in 2007. The World Bank then suggested that countries should undertake macroeconomic policies to try to mitigate the expected losses.
Here are some of the market trends to watch out for in 2020:
- China still won’t surpass the United States – Even if China will outpace the United States in terms of GDP growth at 6.1% vs. 1.7%, respectively, in 2020, America is so far ahead that its competitor in the Far East needs to make significant grounds to catch up. For instance, the United States is expected to have a $22.3 trillion nominal gross domestic product (GDP) in 2020, in which China is on pace to hit $15.7 trillion.
- Consumers are holding on to their money – Consumer spending is such a crucial component of GDP that it is typically used as a barometer if a country is doing well. The Conference Board projects that global consumer spending is not likely to accelerate in 2020. This signals the consumers’ confidence, or the lack thereof, on the economy. The downward trend started in December 2019, the one month in the year where purchases are at record levels. Apparently, consumers have a negative global market outlook for 2020, even if early indications showed no signs of economic weakening.
- UK economy thrives beyond Brexit – The UK is expected to leave the EU on January 31st, 2020, after lawmakers backed PM Boris Johnson’s Brexit Bill. The world is anticipating what will happen to the United Kingdom when it finally leaves the economic aggrupation. However, it seems that the pound sterling will continue to do well against the US dollar. The Bank of England is also expected to loosen some fiscal policies that will bolster the pound.
- Global inflation to pick up – There would be a slight uptick in the global inflation for 2020. The needle will move up to 3.56% from 3.41% in 2019 before going back down again in 2021. The world is still reeling from the effects of the global financial crash, which also impacted inflation.
- Emerging markets continue to perform well – The trade tension between the US and China contributed to a slowdown in capital funding. But the truce had analysts predicting a better global market outlook for 2020, particularly for emerging economies. In fact, they would be mostly responsible for buoying a stable global GDP in 2020, in conjunction with the improving market conditions in Europe. However, the growth hinges on whether additional tariffs will be imposed, which will decelerate trade and export activities.
While the world has enjoyed a reprieve over the trade hostility between America and China, the two countries are expected to revisit their grievances after the 2020 US elections. The world is watching who would be the next US president, who will lay down the policy on how to deal with the economic superpower in the East.
Danis Woods in Businessman, investment banker and stock exchange traders. On the same time he loves writing financial blogs to shed lights on different aspects that new and existing businessman are not aware of.