Growth momentum in many of the world’s economies might have peaked in 2018 and global expansion is projected to start cooling down gradually. Global real GDP growth is forecast at 3.8% in 2018 (a pace similar to 2017), declining to 3.5% in 2019–2020.
GDP growth slowing down globally
Forecasts for many advanced economies have been downgraded since our previous quarterly forecast following worse than expected performance so far in 2018 and rising trade tensions. Advanced economies’ real GDP growth is anticipated to remain strong in 2018 (at 2.3%) and decline to 1.8–2.0% annually in 2019–2020.
Emerging economies’ outlook has been adversely affected by the worsening global trade and external financing conditions as well as lower investor confidence for countries such as Argentina and Turkey. Emerging economies’ GDP is estimated to grow by 5.0% in 2018 and to slow to 4.8% in 2019–2020.
Risks remain high
Overall global risk outlook has worsened since August. Escalating trade barriers, higher political risks, and worsening financial market conditions could further reduce growth across advanced and emerging economies alike.
| SCENARIO | GLOBAL RISK INDEX |
| Global Downturn | 65 ↑ |
| Emerging Markets Slowdown | 40 ↑ |
| Global Crisis | 25 |
| China Hard Landing | 22 |
| Eurozone Recession | 20 ↑ |
| US-China All-Out Trade War | 16 ↑ |
| No-Deal Brexit | 14 |
| Eurozone Crisis | 11 |
| Global Trade War | 11 ↓ |
| Trump Adverse Policies | 10 ↓ |
| Korean Conflict | 9 |
Note: Global Risk Index ranks scenarios by the expected GDP impact, calculated as the impact of the scenario multiplied by its probability.
Biggest forecast changes for Brazil, India and Italy
Brazil
The GDP growth forecast for Brazil has been downgraded to 1.4% in 2018 and 2.2% in 2019 due to weaker than expected Q3 2018 data and tighter monetary policy. Private sector confidence declined further before the presidential election, industrial production dropped in September and inflation has increased. This puts further pressure on the central bank to raise interest rates. While the new government of Jair Bolsonaro is likely to implement more private sector and investor friendly policies, it faces significant barriers to legislation due to a divided Congress.
India
Economic activity increased at the fastest pace in more than two years during April-June 2018, mainly due to faster consumption growth. This better than expected recovery from the previous demonetisation and goods and services tax overhaul shocks has led to an upwards revision of our GDP growth forecasts, to 7.7% in 2018 and 7.6% in 2019.
Italy
The new Italian government presented its first budget in late September, with a budget deficit of 2.4% of GDP, three times higher than 0.8% targeted by the previous government. The new budget has spooked bond markets, with Italian borrowing costs rising to around 3 percentage points higher than Germany’s. The Italian government has refused to compromise on its budget so far, therefore the higher Italian interest rates are likely to persist. The negative impact of higher interest rates on private sector investment are likely to slightly outweigh the stimulus effects of higher government spending and lower taxes. As a result, we have reduced Italy’s GDP growth forecast to 1% in 2018 and 0.8% in 2019.
Euromonitor International’s new macroeconomic outlook, Global Economic Forecasts: Q4 2018 provides the latest Euromonitor International macroeconomic forecasts, assessment of the global economy, discussion of recent events and a deeper analysis of key economies. Download Global Economic Forecasts Q4 2018 to stay ahead of risks and opportunities as they emerge on a macroeconomic basis.