Global | Updated forecasts: World growth to soft land, amid trade tensions and stimulus


  • Global growth continues in a smooth downward path (BBVA-GAIN: steady 0.8% QoQ in 2Q19), led by the weakness of the industrial sector and exports in a context high uncertainty on trade tensions. Domestic demand remains broadly resilient across regions, but is growing at a more moderate pace, with increasing concerns of negative spillover effects from the manufacturing sector.
  • Global growth continues in a smooth downward path (BBVA-GAIN: steady 0.8% QoQ in 2Q19), led by the weakness of the industrial sector and exports in a context high uncertainty on trade tensions. Domestic demand remains broadly resilient across regions, but is growing at a more moderate pace, with increasing concerns of negative spillover effects from the manufacturing sector.
  • With persistent uncertainty and low inflation, major central banks (Fed and ECB) have reassessed their monetary policy stance and consider new stimulus measures. We revise downward World GDP growth forecasts by 0.1pp to 3.3% in both 2019 and 2020. The impact of trade tensions is already apparent, and could be sizeable in the long term.
  • US activity should gradually lose momentum towards its potential growth rate supported by a more dovish Fed (easing cycle of up to 75bp cut). We maintain our GDP growth forecasts at 2.5% in 2019 and 2% in 2020.
  • In the Eurozone, growth has trended down to a more moderate rate driven by the weakness of the industrial sector and increasing uncertainty (trade issues and Brexit) but we maintain broadly unchanged our growth forecasts (+0.1pp to 1.1% in 2019 and -0.1pp to 1.2% in 2020). With inflation persistently very low levels, despite the strength of domestic demand and the labour market, the ECB is expected to be more accommodative (depo rate cut in 3Q19 and refi rate for at 0% for longer, along with a tiered system for deposits).
  • In China, more fiscal stimulus measures are expected (tax cuts and expansion of regional government debt) along with cuts in both lending interest rate and reserve requirements and targeted measures to support credit in the medium-term.
  • These stimulus measures lead us to maintain our forecast of GDP to grow by 6.0% in 2019 and 5.8% in 2020. In Latam, we expect a recovery in 2H19 after a disappointing first half, and we revise downwards Mexico and Brazil (also
  • Peru and others, but the blip is only temporary). Lower inflation and a dovish Fed will allow for more accommodative monetary policies and less pressures on exchange rates.
  • Risks remain strongly on the downside, linked to protectionism (but also to US recession, China’s leveraged exacerbated by new stimulus, Brexit), and could be magnified by financial vulnerabilities.

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