Global Economic Outlook 2019

2018 saw strong growth while leading to a maximum of uncertainty. World growth in 2018 reached again a high level of +3.1%. Yet it nurtured uncertainties on the possibility of a trade war, non-viable US and European fiscal policies, the Fed’s too high assertiveness, emerging markets’ resilience, the multiplication of political risks and a potential burst of the global credit bubble. 2019 will be a denouement year on all these thorny issues. It should lead to a soft landing of the world economy.

The View: Global Insolvencies Outlook

We see business insolvencies to rise for the third consecutive year in 2019 (+6%). The softening economic momentum, coupled by the global tightening of financing conditions, will drive up insolvencies in a majority of countries. 

Global Economic Outlook update (Q4 2018)

Global growth to remain on a healthy trajectory despite the multiplication of risks:

Self-correcting mechanisms: US fiscal and monetary fuses to preserve  the economic circuit from systemic unsustainability

Fine-tuning policy tools: Fueling demand in the short-term and repairing supply in the medium-term will be the leitmotiv of China and Europe

Technical inspection: The market will continue to differentiate defective emerging economies from sound ones

Eurozone Bond Proposals Overview

Since the start of the Euro-crisis in the aftermath of the Great Recession, policy makers and economists alike have put a variety of proposals for eurozone reform on the table. Facing refinancing problems, the doom loop between banks and sovereigns as well as a lack of fiscal discipline, particular attention has been paid to new types of government bonds. 

Construction Report: Soft landing with a loose seatbelt

After ten years of growth (2008-2018), we have reached the peak in the global construction cycle. This year will be the turning point for the global construction industry, beginning to cool down gradually to +3% y/y in 2019, from +3.5% y/y in 2018. Over the past decade, most of the growth came from emerging markets (+57% since 2008), while the developed markets have not even fully regained their pre-crisis volumes. 

The View

Worldwide private household liabilities reached a historic high of EUR 39.8 trillion in 2017. At 6.0%, the growth rate was not only slightly above the previous year's level of 5.5%, but also well above the long-term average annual growth rate of 3.9%. Debt growth has accelerated noticeably since 2013 and is gradually returning to levels seen before the financial crisis.

Trade Report: The show must go on

The report explains why in 2019, trade momentum is set to soften in line with softening of global growth, while protectionism will stay under control. The report gives three ways the trade war could be avoided, and rank the top five destinations for exporters. Going forward, businesses should prepare for higher cost of trade, trade diversion, and rising political risk beyond protectionism.

Bolsonaro's Brazil - What does it mean for corporates?

On Sunday October 28 ^th, Brazil traded a step back in time for a leap of faith into the unknown. The people ditched another workers’ party (PT) presidency and elected Jair Bolsonaro. The business community embraced the sheen of a self-designated ultraliberal over the nostalgia of a left-wing statist.

The View

A cyclone is brewing in the global economy. The US – with its erratic policy-making causing major shocks of uncertainty – is in the eye of the storm, sending headwinds toward the rest of the world. While China, Japan and the Eurozone are in the stable vortex of the cyclone, able to absorb the shocks, emerging markets are in the unstable vortex, leaving them in a vulnerable position. Nevertheless, we predict the global economy can weather this storm, with world GDP growth expected to remain resilient in 2018 and 2019.