Consistent with the broader global economic picture, GDP growth is slowing down among frontier emerging market economies. In 2Q19 GDP growth rates declined in Armenia, Costa Rica, El Salvador, Georgia, Ghana, Jamaica, Jordan, Kenya, Mongolia, Senegal, and Sri Lanka, with Belize, Honduras and Paraguay seeing negative rates.
Weak investment may help explain the secular slowdown in wage growth over the last two decades, a development that has hampered central banks' ability to meet inflation targets and contributed to rising inequality, says Fitch Ratings' economics team.
Germany's heavy dependence on exports means that the slump in world trade and manufacturing has taken a much heavier toll on growth than in other G7 economies. The contribution of gross export demand to German GDP growth has fallen very sharply over the last two years - as highlighted in Fitch's economics team's latest Chart of the Month - and has left the economy on the brink of recession.
World growth forecasts have been cut across the board following the escalation in the US-China trade war in August. We now expect world growth in 2020 to fall to 2.5% , the lowest rate since 2012. Trade policy disruptions will adversely affect exports, manufacturing and business investment and there are limits as to how effective monetary policy easing will be in softening the blow.
The outlook for the global economy has deteriorated significantly due to the escalation in the US-China trade war, Fitch Ratings says in its new Global Economic Outlook (GEO). We now forecast world growth next year to fall to the lowest rate since 2012.
Fitch has introduced new measures of the output gap - or the degree of economic "slack" - for the 10 advanced economies (DM10) covered in its Global Economic Outlook (GEO). These measures have been built upon the signals sent both by the financial cycle, specifically the role of credit and asset prices, and direct survey-based measures of slack in the labour and product markets.
Annual GDP growth rates have been falling since mid-2018 in virtually all of the 20 large developed and emerging economies. This underscores the drag on activity from the sharp global downturn in trade and manufacturing, which has only been cushioned - and not fully offset - by relative resilience in consumer spending and labour market conditions.
The shift in the direction of global monetary policy in the last six months has been more broad-based across geographies than in any period since 2009, with more than a third of central banks covered in the Bank for International Settlements' (BIS) database having eased policy in the past six months.
Private sector financial surpluses in all of the largest eurozone (EZ) economies limit the risk that weakening external demand will be amplified by sharp downward corrections in domestic demand, says Fitch Ratings' economics team.
A number of frontier economies have seen interest rate cuts in recent months against a backdrop of more accommodative global monetary policy conditions. These include: Angola, Azerbaijan, Costa Rica, El Salvador, Jamaica, Mozambique, Sri Lanka and Tajikistan, as highlighted in Fitch Ratings' latest 'Frontier Vision' slide pack.
Most post-war US recessions have been preceded by deteriorating private-sector financial imbalances, but these conditions are not in place currently as shown by Fitch Ratings' economics team's latest Chart of the Month.
The imposition by the US of 25% tariffs on the remaining USD300 billion of imports from China would reduce world economic output by 0.4pp in 2020, Fitch Ratings says. Global GDP growth would slow to 2.7% this year and 2.4% next year, compared with our latest "Global Economic Outlook" baseline forecasts of 2.8% and 2.7% respectively.