The global economy today prepares for the “negative super cycle”
The global economy today has recovered from the effects of the global financial crisis of 2008–2009, although the volume of economic development has not recovered yet. However, early to rejoice. Stable it will stay for long.
Experts predict that already in 2019 a sharp decline in the development of global production is likely. This phenomenon is called the “negative super cycle” and see the possibility of a rapid deterioration of the state of the global economy. Steve Roach, a professor at Yale University, shared this opinion.
The global economy today needs to prepare for new problems.
Roach notes that the “first swallow” is the worsening of the IMF’s forecast for global GDP growth. At the end of 2018, the fund’s experts expected growth of 3.7%, while in January 2019 they expect 3.5%. At the same time, the researchers did not change the trade forecast, which remained at the level of 4%. Roach thinks this is strange, because it is unlikely to be able to withstand such indicators, given Brexit and the “trade war” between China and the United States. These two events can cause huge problems on the planet.
In 2009, a decline in production of 10.4% was recorded, which is a record value in modern history. The recovery of trade was very slow, which is associated with a serious slowdown in the development of the economy. Roach does not agree with this opinion. As an argument, he cites the rate of growth of trade and GDP in the world. In the two previous growth periods (1985-1990 and 2002-2007), the indicator was 1.6. Simply put, after the recession is eliminated, an increase in trade volumes of 60% is recorded, compared to global GDP.
After the crisis of 2008–2009, the coefficient value is 1. That is, trade and GDP move synchronously. Therefore, the IMF’s forecast for trade growth of 4% in 2019 is unrealistic.
Roach considers protectionism along with its negative impact on production chains around the world to be the main reason for this. The main supporter of high duties is the USA. During the inauguration, Donald Trump noted that protectionism could lead the United States to prosperity. Things were not long in coming. The country withdrew from the trans-Pacific agreement, eliminated NAFTA, replacing it with the USMCA, and increased duties for Chinese goods. In fact, the US era of Trump seeks to destroy the multilateral relationship system that the country itself created.
In 2018, the economic slowdown of China took place. In December, imports fell by 7.5%, which is a frightening trend. Along with it, exports fell by 4.5%. There are two reasons for such phenomena: the trade war and the decline in domestic consumption. The authorities of the Middle Kingdom are trying to take measures to combat these phenomena, but recovery will take at least six months. China ranks first in the world in terms of exports and second in terms of imports. Therefore, the problems of the state cannot pass without a trace for trade. Another blow to the global economy is Brexit. The European Union is the world’s largest importer and ranks second in terms of exports.
Britain’s share in the sale of manufactured goods accounts for 3% of the EU’s total GDP, so it is impossible to close the eyes on the UK’s exit from the Eurozone. All the above factors have led to a stressful state for the economy of the planet. Therefore, Roach suggests a serious decline already in 2019. Actually, it has already begun. In addition, everyone will suffer from this, including the United States. Despite Trump’s claims that it is easy to win a trade war, the US economy also risks getting a powerful blow.
