ZCZC
BCN-09
WORLD-ECONOMY-YEAR2019
The big shortcoming: A grumpy 2020 for global growth
PARIS, Dec 26, 2019 (BSS/AFP) – US political clouds coupled with wider
climate and digital transformations point to a tricky 2020 for the world
economy, although experts say a lurch back to crisis is improbable.
The Organisation for Economic Co-operation and Development said last month
that activity had been hobbled by weaker trade and investment in the past two
years, as US President Donald Trump pursued a trade war with China.
The OECD expects global growth to dip in the coming year to 2.9 percent,
its lowest level since the world recession of 2009.
Trump appears to have struck a truce with China for now, under a “phase
one” pact announced this month, but pre-existing tariffs remain in place and
it will take time to demobilise their effects.
More broadly, the OECD contrasted proactive actions taken by central banks
with the policy foot-dragging by governments in the face of climate change
and the march of technology.
Industrialists and investors are having to correct their climate
strategies even as Trump sits firm in his policy of denial. Oil giant Saudi
Aramco recently had to trim back the volume of its gigantic share offering.
The International Monetary Fund was a little more optimistic in its latest
World Economic Outlook, forecasting 2020 growth of 3.4 percent but warning
nevertheless of a “synchronised slowdown and uncertain recovery”.
At a time of populism and protests around the world, politics will remain
an economic wild card next year.
Trump heads into the November presidential election under an impeachment
cloud, and Britain’s Brexit divorce from the European Union will likely be
sealed next month, following Prime Minister Boris Johnson’s election triumph.
The rise of technological giants sitting on mountains of data is meanwhile
challenging the distribution of wealth between governments and big business,
and has the potential to reshape the world of work as artificial intelligence
exploits that data.
The online arena has emerged as another front for Trump’s trade wars,
after he threatened tariffs on France over its digital tax imposed on the
likes of Amazon, Facebook and Google. Europe is threatening a collective
response.
MORE/HR/1050
ZCZC
BCN-10
WORLD-ECONOMY-YEAR2019 2 LAST PARIS
– Between heaven and hell –
Ludovic Subran, chief economist of German insurance giant Allianz, sees a
global “purgatory of growth” coming up.
Any systemic shock next year “will probably not be born in finance, but
will be exogenous, for example a big regulatory shock on personal data, or in
relation to the climate”, he said.
If Trump survives the impeachment process and wins a second term, he could
“double the bet against China” at the risk of military confrontation, Subran
added.
Trump and his potential challengers on the Democratic left are united in
their hostility to the free-trade and liberalisation agendas that, they
argue, hollowed out industrial America over the past decades.
The mistrust is felt well beyond the United States.
“We’re not worried about how to overcome a cyclical crisis, we know what
to do,” said Ingo Kuebler, the staff representative at Mahle, a German
automotive supplier that has already been forced to downsize as car buyers
turn away from diesel engines.
“The big issue is transformation, digitalisation, electric mobility,” he
told AFP, fretting that an influx of cheap Chinese car batteries means “we
are dreading the loss of many jobs”.
– The big income gap –
Since the financial crisis a decade ago, central bank policies have led to
negative interest rates spreading in some countries, squeezing bank
profitability and inflating private debt.
With growth faltering, the debate about wealth distribution will likely
become still more acute. Anger at inequality runs like a thread through
protest movements from rich Hong Kong to developing Chile.
In 2018, according to Oxfam, 26 billionaires had as much money as the
poorest half of the world.
“Even when people seem to enjoy basic material comfort, they may still
experience the same level of misery and unhappiness as the poorest,” French
academic Esther Duflo said in October after she won the Nobel Prize in
economics.
US investor Steve Eisman of “The Big Short” fame thinks that another
global crisis is unlikely, but the best that can be hoped for is a slow
strangulation of growth.
“What will happen next time, whenever it does happen, will be your normal
garden variety of recession where the economy slows and goes negative and
people lose money. That’ll be painful enough,” Eisman told AFP.
“A systemic crisis? Once was enough for our lifetimes,” he said,
reflecting back on the implosion of 2007-2008 that made hundreds of millions
for his hedge fund when he correctly foretold the US subprime collapse.
The prescient strategy of Eisman and other investment mavericks was
recounted in a book by journalist Michael Lewis and subsequent Oscar-winning
movie.
BSS/AFP/HR/1055