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World growth will stabilise in 2020, with the possibility of positive surprises in Europe and emerging economies

The outlook for growth for the economy in 2020 is positive, especially considering that trade negotiations between the United States and China have improved. However, this favourable scenario will be conditioned by some risks, such as the outcome of Brexit or new trade tensions. Pedro Álvarez Ondina, of Bankia Studies, analyses the behaviour of the macroeconomic scenario for this year.

Bankia Comunicación

By  Bankia Comunicación

Publish on 
22 January 2020 - 12:00

The most likely macroeconomic scenario for 2020 is that the slowdown of the last two and a half years will end and that world growth will stabilise and rise slightly from the second semester, with some regional differences.

The growth rates in 2020 could be somewhat lower than in 2019 in the US (1.8% vs. 2.3%), similar in Asia (5.0%) and in the EU (1.2%), and in some emerging economies that are recovering from very complicated situations, many of them in Latin America.

In Europe, it must be taken into account that Brexit will be official on 31 January and uncertainty will continue to be very high. Negotiations on the future relations between the two economies are still pending and it is not at all clear whether there will be a soft or hard Brexit once the transition period ends.

If these reasonably positive forecasts are met, both the Federal Reserve and the ECB will make few changes to their monetary policies. Specifically, the ECB is unlikely to modify interest rates, unless the recovery of Europe is delayed, in which case it could lower deposit facility rate by at most 10 bp. In addition, the asset purchase program will continue throughout the year and will continue to contribute to keeping the returns on European debt very tight.

In Spain, we expect the path of moderation in GDP increase rates to continue until it reaches the potential rates, which would point to an average annual growth of 1.5%.

To the extent that the confidence of the actors stabilises or improves smoothly and, given that the economy has not accumulated high imbalances, the adjustment of activity will be moderate. Only a negative external shock could lead to a recession.

In this regard, the main risks come from a further weakening of our export markets, especially the EMU, an increase in protectionist measures, potential geopolitical tensions that affect, in particular, the oil market, or the uncertainty derived from the outcome of Brexit.

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