2019 was a dynamic and unpredictable year for the global economy so here is a 2020 prediction for this sector.
Trade Wars & China
Despite the preliminary agreement between United States of America and China of a “phase one” trade deal that promises at least a cease-fire between the world’s two biggest economies, the trade wars are far and will continue through 2020. That “phase one” deal with China isn’t yet a done deal—and similar agreements have come undone in months past.
This aspect will most likely hold a lot of interest in 2020.
World Debt
Whether corporate debt, household debt, or national debt, whether in developed or developing economies—is at record-high levels. This is partly a product of the loose-money policy many central banks pursued to cushion trade and other shocks to the economy. That is itself a cause for concern, as those central banks, with interest rates already low, don’t have a lot of room to cut further to cushion any fresh debt shocks.
And the debt pile is huge. The World Bank, in a special report, noted that global debt levels reached an all-time high of 230 percent of GDP in 2018 and have grown since. With this being said, a global recession could be on the way.
Geopolitical Risks
The usual troubles in the world: from ongoing tension among Iran and Saudi Arabia and the United States to spreading chaos throughout North Africa to the prospect for heightened tensions in Asia, whether over North Korea’s nuclear program or China’s ambitious designs on the South China Sea, Hong Kong, and Taiwan.
There are also good old-fashioned political risks, such as the global resurgence of populism around the world, which in many cases means taking aim at market economics, to the detriment of what drove growth for decades. Greater tension, or outright conflict with Iran as a result of the Trump administration’s maximum pressure campaign, would likely send oil prices higher, which would act as a brake on global growth. Intensified protests in the broader Middle East and North Africa, coupled with renewed fighting in Libya and an adventurous Turkey, raise questions about the economic resurgence of many of the region’s emerging economies, themselves a key for global growth this year. With these being said, geopolitical risks will also take the spotlight this year with many of them threatening to escalade.
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