The global economy should avert a fully-fledged recession next year thanks to proactive measures by policymakers, according to trade credit insurer Euler Hermes.
“A soft landing of the global economy remains our baseline scenario as superdovish central banks, a new fiscal impulse in the US, China and Europe to a lesser extent, help safeguard global growth,” said Euler Hermes in a note to clients.
It also cited the possibility of a ‘temporary relaxation’ in the US-China trade dispute, with US attention likely to switch towards the EU as the Trump administration seeks to exert pressure on the European bloc ahead of trade negotiations.
The insurer expects global growth to come in at 2.4% in 2020 (the lowest since 2009), down from 2.5% in 2019 and 3.1% in 2018. Euler Hermes projects that quarter-on-quarter growth will bottom out in 1Q20, before recovering moderately in 1H20.
“Such bottoming out should be caused by a correction in very high levels of inventories, the negative impact from the trade feud, insufficient fiscal stimulus, and consumer fatigue causing zero growth in the US, while elsewhere growth will be flatlining,” the note said.
On the whole for 2020, it predicts growth to decelerate in the US to 1.6%, the Eurozone to 1% and China to 6.1%.
Consumers to be a source of resilience
Euler Hermes expects consumers to remain a source of resilience for the global economy amid a prolonged low growth period.
“Global economic growth will continue to be supported by the consumer, who will in turn support the services and construction sectors,” said the insurer while adding that a modest deterioration in the labour markets would not be enough to hurt consumer confidence.
However, the negative impact from a continuation of the US-China trade feud will keep manufacturing production – especially for intermediate goods – at ‘very depressed levels’. M