2019-2020 world crisis: will there be

The global global crisis of 2019-2020 is predicted by leading economists and financiers from around the world. The World Bank does not exclude such a possibility. One of the arguments of his experts is that a recession occurs every 10 years. So financial shocks can be expected at any time - by analogy with 2008-2009.

Global Perspectives from the World Bank

In their report “Global Economic Perspectives,” World Bank analysts assess immediate prospects as optimistic. The conclusion is based on accelerated economic growth, which shows more than half of the world's states. However, near the end of the year, forecasts become more alarming - experts do not rule out the onset of the crisis in 2020. If we analyze the last 50-year period, it turns out that global recessions occurred almost every 10-12 years.

The basic forecast for global economic growth for the current year is 3%, but financiers believe that the real figure will be below 2%. This probability is estimated at 21%. Recall that in the 2008th economy showed growth of 1.8% - this led to a financial collapse.

8 signals of upcoming changes

Nuriel Roubini, one of the most influential economists in the world, also predicts a global financial crisis in 2019-2020. His previous forecast came true with absolute accuracy. In his article published on the pages of Project Syndicate, the expert notes that all the conditions for its onset will mature by the indicated period, and lists 8 signs of a close global recession:

1. The cessation of fiscal stimulus, which will entail a drop in economic growth to 2% or lower.
2. Overheating of the American economy due to high inflation.
3. Aggravation of American trade relations with China, Canada, the EU and other states. This state of affairs in the world market slows down economic growth and increases inflation.
4. The US Federal Reserve will continue to be forced to raise interest rates. The chain reaction may be a reduction in external and internal investment.
5. Aggravation of opposition to US protectionism from other states. Emerging markets in developing countries are fully aware of its effects.
6. Slow economic growth in the Eurozone, internal financial contradictions. Instability can be a "starting hook" for Italy and other EU member states to exit from it.
7. The low yield of government bonds in the United States will make them too expensive, the cost of high-yield loans will negatively affect the state of the real estate market.
8. Investors, sensing the imminent changes, will try to quickly get rid of illiquid obligations, sell them urgently.

Nuriel Roubini does not rule out the 2020 foreign policy crisis and the US military confrontation with Iran, organized by Donald Trump.

The analyst focuses on the fact that next year is the election in the United States. This can weaken the economy more than predicted, slowing growth to 1%, if not lower. As a result, the United States will face the problem of job shortages and unemployment.

If the situation is aggravated by the Iran-US military conflict, the crisis will be even more severe, up to the insolvency of individual governments.It is unlikely that the authorities will be able to prevent a recession, since the tools for this are limited and the amount of debt is higher than in the previous crisis period.

Background of the crisis

The first alarm signals appeared at the end of last year, when US exchanges closed with a sharp decrease in the Dow Jones, S&P 500, and Nasdaq indices. It was the worst exchange week in a decade.

Experts closely monitor the dynamics in the commodity market and pay attention to the rapid drop in prices for the main commodity groups. Today, big business is preparing for a drop in production, reducing the need for energy and raw materials. Negative sentiment is already being felt in the American consumer market. The research results show that representatives of small and medium-sized businesses are not optimistic - they look to the future realistically and are preparing for falling profit volumes this year.

The lack of political stability in the world is not the best condition for economic development and growth. France was flooded with protests, a change of politicians ahead of Germany, and the end of Brexit in the EU. What's next? Analysts are cautious in forecasts.

Trade wars

The IMF believes that global trade will decline to 4%. If we compare with the indicator of 2018, then the decline is insignificant - by 0.2%. And if we take the indicators of 2017, then the reduction in trade is much more noticeable - by 1.2%.

Fund experts see the main reason for the trade wars between Washington and Beijing. The main intrigue is whether it will be possible to conclude a trade agreement with the two leading economies of the world before March 1 of this year. In the meantime, the parties are far from this step - there are serious disagreements on a number of issues.

Recent events related to Huawei and the accusation of its chief financial officer for industrial espionage, experts call the White House an attempt to strengthen its position in the upcoming negotiations. No less tough position was taken by the Chinese side.

Both China and the USA understand how dangerous an unresolved problem is and how stock markets can react to it. Accordingly, it should be decided within a few months.

Global or Asian?

Will the 2019-2020 crisis be global? There are different versions in this regard. According to one of them, China will become the epicenter of economic collapse. The recession will affect Asian developing countries - this was already the case in 1998, when the crisis affected Thailand, Malaysia, Indonesia, and later Argentina and the Russian Federation. This time, such points of instability can be Argentina, Turkey, Brazil.

It is naive to expect that the collapse of the Chinese economy will pass without a trace to the whole world. China is one of the largest consumers of metal and oil, so the consequences will be tangible. Especially in these segments.

Read also:

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• Economic forecast for Russia in 2020
• Debt policy of the Russian Federation for 2018-2020

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