An Article Written by Zuleykha Gasinova
As we progress to the last month of 2018, economists and various well-known financial agencies have released their forecasts about economic trends in 2019 and upcoming years. Considering the overwhelming economic and political agenda of 2018, economists have a distinct analysis regarding the U.S and global economy. While some economists are predicting a potential slowdown in the economic growth of the U.S and forecasting a recession in the second half of 2020, another group of economists do not feel gloomy about the current economic trends and therefore believe that the U.S economy will continue to grow and even help to boost the global economy. In this article, we are going to closely examine opposing arguments of economists regarding the 2019 economic trends.
There are groups of economists who predict that there is going to be a slowdown from a booming 3.1% growth because of fiscal and monetary tightening, and restrictive trade policies. According to JP Morgan economists, the economic growth in 2018 was due to tax cuts, stimulus and tightening in the labor market; however, they expect a slowdown to 1.9% for the upcoming year. The economists expect the Federal Reserve to raise interest rates a few times throughout the next year to control the growth, making the cost of borrowing more expensive for consumers and businesses. Also, the markets might tighten in part because of fading tax cut effects leading to less consumer spending. Another possible reason for heading towards a recession globally might be trade wars that occupy the political agenda. Although it is true that there might be a potential hit to China’s economy, reducing imports can also trigger supply chain issues for American producers and raise consumer prices.
On the other hand, some economists believe that there is nothing to worry about with regards to global economic growth despite several negative headlines. Considering some economic growth and increasing wages, they suggest that the U.S economy has strengthened, and it will also trigger global economic growth. However, according to these economists’ forecasts, the U.S out-performance might cause some problems to vulnerable economies such as Argentina and Turkey. Because of rising interest rates, there might be a potential capital outflow to the U.S that forces these countries to raise their interest rates, which in turn would tighten the economy.
It is also worth considering the economic statements from the International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) pointing to a slowdown in global economic growth due to heated trade wars and rising interest rates. The IMF is also predicting the slowest growth rate for China since 1990, due to U.S taxes on Chinese imports. The OECD also mentioned trade wars and political turbulence along with rising oil prices, renewed embargoes on Iran, putting stable economic growth at risk. The report also included some vulnerable economies such as Russia, Brazil, Turkey and South Africa.