The world economy has entered a "synchronized delay" phase, which may worsen in 2019.
Sentiment indicators and economic data from developed and emerging economies have worsened since last fall, suggesting a slowdown in the momentum of global growth. This phenomenon also discourages the need for new reforms and economic incentives.
The deterioration in prospects made Christine Lagarde, the director of the IMF, send out several warnings in a row. She said the fund had trimmed the prospects for global growth, and the World Trade Organization voiced their unease that non-stop trade skirmishes would only continue to worsen the economic situation.
Data on economic activity is weaker, which has led to a worsening of several growth indicators. Countries like Italy have fallen into recession, and Germany is on the brink of economic stability. At the same time, the US economy is showing signs of "fatigue" because of the diminishing effect of Trump's tax benefits.
Although sentiment remains high in advanced economies, it has deteriorated significantly in emerging markets below normal levels. China is leading because of the fears that aggressive economic growth is coming to an end.
The indicators of economic growth in Europe are also quite enchanting. Globally, only India stands out as an exception to the downward trend. The economy is supported by fiscal and monetary policies and government incentives.
The delay in negotiations between the US and China already raises questions about whether the world economy will recover in time before it is too late.
The consequences of the war will most likely have a lasting effect on the world's economy. Uncertainty of the bottom line undermines business confidence and suppresses private investment. Any further deterioration in the situation could, however, come from politicians who may not be able to implement the right reforms or incentives in time.
High levels of public debt are likely to limit the ability of large economies to counteract fiscal damping. Conventional monetary policy remains inefficient in many regions, where we see levels of interest even below zero in some places. Other conventional methods put at risk anyhow unsure corporate results.
Source: Financial Times
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