Annual global economic growth peaked in 2017-2018 and we forecast a soft landing of the world economy in 2019 and 2020. Against this backdrop, we studied the main transmission routes of a global slowdown to individual economies and identified countries that are the most vulnerable along three channels: external financing, trade and commodity prices.
On 5 March 2019, at the key annual session of the National People’s Congress, China’s top legislature lowered the country’s economic growth target for 2019 to 6.0%-6.5%. It also announced a significant fiscal package of RMB4.15tn (5% GDP), including tax and fee cuts (RMB2tn) and infrastructure spending (RMB2.15tn).
A decade after the onset of the great financial crisis, the Eurozone as a whole appears to be in relatively good shape again. Unemployment has dropped sharply, the current account now boasts a robust surplus and the positive trend in public finances meant that in 2018, for the first time ever, all Eurozone countries respected the 3% Maastricht criterion with the average Eurozone budget deficit coming in at 0.6% in relation to GDP.
The German economy is moving sideways. After the slight decline in economic output in the third quarter, real gross domestic product in the final quarter of 2018, increased only slightly by 0.02% in seasonally adjusted terms compared with the previous quarter.
From scoping (hidden debt) or for cyclical reasons, we believe that corporate spreads are undervalued today, and that unfortunate events (rapid downturn, market defaults) could end up pushing up spread by 70-190bps, by sheer realization by market actors of intrinsic risks in that segment.
Industrial production rose only slightly in December with a plus of 0.2% compared to the previous month. On average in the fourth quarter, production thus fell sharply by 1.6% compared with the third quarter.