In 2019-20, overactive policy makers, especially superdovish central bankers, and a new fiscal impulse (U.S., China and Europe, to a lesser extent) will help avoid a global recession, but flatlining growth – with activity bottoming out in Q1 2020 – will be the norm, reminding us of 2015-16 muddle-through. Over the summer, escalating political risks (U.S.-China rivalry, Brexit, Italy’s new government) exacerbated the pockets of recession visible in the first half of the year in trade, manufacturing and a dozen of economies. Looking ahead, a soft landing remains our baseline scenario (+2.4% in 2020, down from +2.5% in 2019 and +3.1% in 2018). In 2020, the U.S. should decelerate to +1.6%, the Eurozone to +1.0% and China to +6.1%. Global trade of goods and services will grow by +1.7%, the lowest rate since 2009. Consumers will be a source of resilience (low unemployment and high savings); domestic sectors, such as services and construction will help bridge a pivotal H1 2020, before easing monetary conditions and lower political risk help the manufacturing sector recover in H2 2020.
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