Impacted by prolonged trade disputes, the global economy suffered its lowest growth in a decade, slipping to 2.3 per cent in 2019. The United Nations’ World Economic Situation and Prospects 2020 report predicts that one in five countries will see per capita incomes stagnate or decline this year.
The world, however, could see a slight uptick in economic activity in 2020 if risks are kept at bay. Prospects for economic growth in 2020 hinge on reducing trade disputes and uncertainty. The Report states that growth of 2.5 per cent in 2020 is possible, but a flareup of trade tensions, financial turmoil, or an escalation of geopolitical tensions could derail a recovery.
In a downside scenario, global growth would slow to just 1.8 per cent this year. A prolonged weakness in global economic activity may cause significant setbacks for sustainable development, including the goals to eradicate poverty and create decent jobs for all. At the same time, pervasive inequalities and the deepening climate crisis are fueling growing discontent in many parts of the world.
UN Secretary-General António Guterres warned that “These risks could inflict severe and long-lasting damage on development prospects. They also threaten to encourage a further rise in inward-looking policies, at a point when global cooperation is paramount.”
East Asia is engine to global growth
Despite significant headwinds, East Asia remains the world’s fastest growing region and the largest contributor to global growth. In China, GDP growth is projected to moderate gradually from 6.1 per cent in 2019 to 6.0 per cent in 2020 and 5.9 per cent in 2021, supported by more accommodative monetary and fiscal policies.
Growth in other large emerging countries, including Brazil, India, Mexico, the Russian Federation and Turkey, is expected to gain some momentum in 2020.
In the United States, recent interest rate cuts by the US Federal Reserve may lend some support to economic activity. However, given persistent policy uncertainty, weak business confidence and waning fiscal stimulus, GDP growth in the United States is forecast to slow from 2.2 per cent in 2019 to 1.7 per cent in 2020.
In the European Union, manufacturing will continue to be held back by global uncertainty, but this will be partially offset by steady growth in private consumption, allowing a modest rise in GDP growth from 1.4 per cent in 2019 to 1.6 per cent in 2020.