Global growth to ease marginally in 2019 – ABN AMRO

Han de Jong, chief economist at ABN AMRO, thinks that the factors that contributed to the slowing of growth in 2018 will be less forceful in 2019.

Key Quotes

“There is one factor working in the opposite direction, which is the effect of US fiscal policy. The effects of tax cuts, tax reform and spending increases boosted US activity in 2018 and will continue to do so, but the effects will wear off in the course of 2019. On balance, we therefore expect the pace of global growth to ease marginally from its current levels. That will translate in lower overall growth number for 2019 compared to 2018, but the differences are not huge. We are not expecting a recession in key economies in 2019, nor in 2020.”

“If we are going to be wrong, the most likely reason will be that US inflation accelerates, forcing the Fed to tighten more aggressively. All bets are off if that happens as such a policy may be appropriate for the US, but it will be highly inappropriate for the rest of the world.” 

“A second big risk to the outlook is a possible escalation of the trade conflict between the US and China and a renewed conflict between the US and Europe. Direct effects will increase and confidence effects will worsen. China remains a risk to the world economy, if only for the lack of transparency. The policymakers appear to have been successful in their deleveraging efforts. The risks of financial instability have been reduced, but most likely not eliminated.”