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Global economic growth is expected to slow down in 2019
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Loading...Global economic growth is expected to slow down in 2019, according to UBS, as tighter monetary policy, weaker earnings growth and political challenges confront the world's major economies.
After seeing a growth of 3.8 percent in 2018, UBS said in its outlook for the year ahead that it expected global economic growth to slow to 3.6 percent in 2019.
"Our outlook is that U.S. growth will be constrained by ebbing fiscal stimulus and higher interest rates," economists at UBS said in a note Wednesday. China, meanwhile, is facing the twin pressures of import U.S. tariffs and economic rebalancing.
"The decline in global growth will mean a weaker tailwind for global markets, which could begin to anticipate an end of the economic cycle as 2019 progresses," the investment bank said.
In the meantime, solid domestic demand in the euro zone will not be sufficient to offset reduced export growth, the bank said.
On the bright side, UBS said a recession looks unlikely given current rates of consumption, investment and employment growth "and we think the typical causes of a downturn are unlikely to materialize in 2019."
Among the biggest challenges facing the world's largest economies is a new era of tighter monetary policy following a decade of stimulus after the financial crisis of 2008.
Central banks in the U.S., U.K., euro zone, Japan and elsewhere introduced a mixture of low interest rates and expansionary monetary stimulus programs, known as "quantitative easing" (QE) — essentially large-scale asset purchases — in a bid to boost spending in the economy.
While these tools were useful in re-establishing stability in global financial systems, central banks are keen to "normalize" such policies.
The U.S. has already stopped its QE program and hiked interest rates four times in 2018 while the European Central Bank confirmed in December that QE would end at the end of the month, with bond purchases falling from 15 billion euros ($17 billion) a month to zero. Amid ongoing Brexit uncertainty, meanwhile, the Bank of England has yet to say when its own QE program will end, although interest rates have been raised slightly.
Source: CNBC
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