Global economic forecast: January 2020

Global outlook: a mild upturn is in prospect

The global economic climate proved challenging for UK firms last year, as a combination of decelerating economic growth in major markets, demand shocks in some industrial sectors and the escalating trade war between the US and China led to a downturn in global manufacturing, investment and trade. At the start of 2020 there are tentative signs that the slowdown is bottoming out, and the recent thawing in US-China tensions gives some more glimmers of hope. But global growth is likely to remain subdued this year and as trade risks diminish, geopolitical risks are rising.

Key highlights from our economic forecast:

• In the eurozone, GDP growth slowed steadily through 2019 to a little above 1% in Q3, though this was marked by increased divergence.
• Germany’s economy buckled given the pressure on its large manufacturing sector, but the less-internationally exposed French economy proved more resilient.
• Further afield, US growth has slipped from close to 3% in 2018 to nearer 2% in Q3, as President Trump’s fiscal boost faded and uncertainty fuelled by the trade war with China spilled over into a sharp weakening of corporate investment.
• Meanwhile, China has continued to slow, with growth slipping closer towards the 6% threshold, reflecting a cautious policy stance and a collapse in bilateral trade with the US.
• Indeed, the US trade war with China has contributed to a slowdown in world trade that is unprecedented outside a global recession.

Hungry for more?

• Read our latest UK economic forecast
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• Read our latest Economy in brief