Daily Management Review

Developing economies slowing down in 2019


02/04/2020


The American economy’s growth rate in 2019 compared to 2018 slowed significantly - to 2.3% from 2.9%. Separately, in the fourth quarter, US GDP growth amounted to 2.1%. At the same time, consumption growth slowed down to 1.8% from 3.2% in the third quarter, capital investment fell again - by 1.5% against a drop of 2.3%. The main contribution to the growth of the economy was made by net exports: export of goods grew by 1.4%, while imports dipped by 8.7% amid duties. Real estate investment growth was also recorded (5.8% versus 4.6% a quarter earlier).



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In the euro area, GDP growth at the end of 2019 increased only by 1.2% against 1.8% a year earlier and 2.7% in 2017. At the same time, in the fourth quarter of 2019 relative to the third, the growth rate was only 0.1%, after the economy declined in France and Italy by 0.1% and 0.3%, respectively.

Despite the weak statistics of the fourth quarter, growth in the euro area countries may accelerate during 2020, according to ING Bank. First of all, this will happen due to normalization of the situation in the industry, which reduced output following the decrease in the volume of export orders last year. However, Capital Economics does not exclude the possibility that at this time the European Central Bank could further soften its monetary policy.

Meanwhile, the coronavirus outbreak may be added to the reasons for the slowdown in developed countries. Oxford Economics experts believe that because of it, global GDP growth in 2020 could slow down by 0.2 percentage points, to 2.3%. Due to the epidemic, the Chinese economy is expected to slow down in the first quarter, which will negatively impact other countries. Meanwhile, the Central Bank of China yesterday lowered its weekly and two-week repo rate. But this is not enough to compensate for the effect of reduced business activity, so the regulator is likely to continue to reduce the cost of borrowing, Capital Economics expects.

Center experts do not exclude that Chinese growth in the first quarter of 2020 will slow down to 3% against the previously expected 5.7%. In 2003, against the background of the spread of SARS, China's GDP growth for the quarter in which the incidence peak was recorded slowed down from 8% to 5%, but now the Chinese economy is much more integrated into the global economy, according to Capital Economics.

source: capitaleconomics.com






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