E Global Economic Outlook Hasn't Changed Despite Market And Trade War Jitters -

E Global Economic Outlook Hasn’t Changed Despite Market And Trade War Jitters

Nov 10, 2018Jeremy ParkinsonFinance, No picture0

The Bank of Canada, like other large forecasting agencies, expects the global economy to continue to be strong over the next two years, despite worries about the US-China trade war.

Indeed, on the positive side, the proposed new trade agreement between Canada, the United States and Mexico reduces some of the trade policy uncertainty within North America. Nonetheless, the troubling steel and aluminum tariffs still exist.

Because China is such a populous country and is developing so quickly, its economy exerts a substantial impact on global growth. Indeed, as the October 23 Economist points out, China has accounted for 45% of the increase in world GDP since the start of the financial crisis in 2008. In the following projections, one can see that the Bank of Canada agrees with the consensus view of a gradual slowing in China’s economy into 2020.

The US economy is also expected to grow more slowly into the future after an estimated 2.9% peak rate of growth this year. US economic growth is then projected to decelerate to 2.4% in 2019 and 1.6% in 2020 as the fiscal stimulus effects slip away.

In line with the US pattern of growth, the Euro area economy is expected to slip into a slower, but steady, 1.5% growth path in 2019 and 2020. The oil importing emerging market economies are expected to slow sharply next year from the higher growth rates recently experienced.

Finally, there is literally no question that the US-China trade dispute will somewhat reduce total global activity. The Bank expects the total drag effect from the trade war to reduce global GDP by 0.3 percentage points by the end of 2020. Overall, the Bank expects the global economy to expand 3.8% this year and by 3.4% in both 2019 and 2020.