A Look At Global Economic Growth Ahead Of An Anticipated War

There is a simmering war between the United States of America (USA) and Iran. Despite the fact that the two nations are chest-thumping and threatening to go after each other’s throat, the world is worried.

Already fuel prices around the world have started going up after the United States killed an Iranian General Qasem Soleimani who had landed in Iraq for a meeting.

As the drums of war continue to be sounded, 2020 is not that promising economically. But how did the global economy perform in 2019? According to stats compiled by Cytonn Investments, 2019 did not go down well for most global economies.

The year 2019 was characterized by a slow-down in global growth, which was weighed down by the negative effects of the trade conflicts among the major economies.

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2019 was mostly affected by:

An ongoing trade dispute between the US and China,

Uncertainty in Britain over its exit from the European Union (“Brexit”),

Geopolitical tension between the US and Iran, disrupting the mid-stream and down-stream oil supply channel

Overall slowing global trade, which, according to the World Trade Organization, is forecasted to grow by 1.2 percent in 2019.

According to IMF, global GDP growth in 2019 is expected to come in at 3.0 percent, a 0.3 percentage point downgrade from their initial projection from the April 2019 World Economic Outlook, and lower than the 5-year average of 3.5 percent.

The IMF downgraded their expectations mainly as a result of uncertainty about prospects for some economies in the Eurozone, which include the slowdown in the German economy, and a projected slowdown in China and the United States, which have resulted in a much more subdued pace of global activity.

The World Trade Organization (WTO) lowered its outlook for world trade growth in 2019 to 1.2 percent from their 2.6 percent expectation in April 2019, citing that the ongoing trade conflicts pose the biggest downside risk.

The uncertainty generated by the continuous trade conflicts has had the impact of reducing international trade as export and import growth slowed down across all regions.

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Global equity markets registered gains during the year, as shown in the chart below, as gains were realized by US technology giants, a recovery in the Eurozone supported by the late inflow of funds resulting from the December general election, and Asian stocks that have benefited from the government’s hiked spending on construction and infrastructure projects.

Stock markets surged despite the ongoing trade disputes and warnings of slowing growth in major economies such as Germany.

Global commodities registered declines in 2019.

The agriculture, non-energy commodities, metals & minerals, and Brent oil registered declines of 4.6, 4.7, 6.0, and 11.8 percent, respectively.

The energy sector was the biggest decliner falling by 14.9 percent, according to the World Bank Commodity Prices Index. The decline in energy was largely driven by slowing global demand during the year.

Below is a chart highlighting the performance of select commodity indices: