After 1984, 1992, 2000 and 2008, it seemed that an expansionary cycle of eight years followed by a great depression had been diluted by achieving world GDP growth of 3.1% in 2016, followed by 3.7 in 2017 and 3.6 in 2018. The point is that the OECD has established a potential growth in 2019 of 2.9% and 3% in 2020, the lowest data for a decade.
What is happening? The meteorological definition of a perfect storm is when heat on the surface, cold air in the upper layers, humidity and upward movement of air are combined.
Economically speaking, in the third quarter of 2019 we have an increase in private debt to add to the public; a great uncertainty derived from Brexit and a trade war between the US and China that escalates positions month by month.
Investors are cautiously following the commercial conflict, withholding their purchase orders, which, together with many doubts regarding the currently prevailing monetary policies and distrust of the capital markets, calls into question a potential growth that was already forecast at the beginning of year as weak.
To all this is added the potential evolution of oil prices, currently around USD65 a Brent barrel, with a clear upward trend due to the attacks suffered this week by refineries in Saudi Arabia, which forced this country to interrupt half of its production. The main target for these events is Iran and US Secretary of State Mike Pompeo has defined it as “an act of war.” Remember that in the US the position of Secretary of State is a kind of Ministry of Foreign Affairs
After Saudi Arabia, the Emirates have been identified as a new potential destination for future attacks, which will lead to reductions in the supply of the precious raw material.
All this uncertainty is being especially severe with the industrial sector, especially in the OECD countries, a clear example being the German economy with potential growth of 0.5% in 2019, 1% less than in 2018.
The OECD estimates that the US economy will grow by around 2.4% this year and 2% next year, China by 6.1% and 5.7% and the euro area by 1.1% and 1% in 2020
It will be an interesting few months until the next US presidential elections to see if the expansionary period that we have been experiencing since 2014 can be further extended globally.
Economists of great prestige indicate that perhaps this situation can bring at least the end of the period of austerity that was installed in the old continent more than five years ago. And that is perhaps what Europe needs to start growing strongly.
PS: The author of Just What I needed Ric Ocasek passed away on 09.15.2019. A great singer from a great group