World – Macroeconomic Scenario for 2020-2021: a delicate balance

World – Macroeconomic Scenario for 2020-2021: a delicate balance
  • Developed countries – A highly risky slowdown
  • Emerging countries – Slightly better in 2020
  • Oil – The light at the end of the tunnel is still dim
  • Monetary policy – From the benevolent status quo to inevitable easing
  • Interest rates –Repeat as needed
  • Exchange rates – The dollar’s advantage is weakening
  • Economic and financial forecasts

In summary

Although nothing currently suggests that growth rates are about to plunge, a jittery climate hampered by crippling uncertainty and business investment that is declining to varying extents are contributing to a downturn. Households are holding up well, helped by low inflation and favourable financial conditions, which should help to soften the impact of the cycle, under the watchful (and benevolent) eye of central banks. From the risky economic slowdown to accommodative monetary policy, everything is pointing towards interest rates remaining at desperately low levels.

World – Macroeconomic Scenario for 2020-2021: a delicate balance

Business investment has held up well until now but a downturn is becoming apparent. Warranted by uncertainty over future demand, which is largely due to concerns over global trade, the downturn is strangely both premature and still contained. Premature in the sense that it has not occurred in the wake of a classic cyclical deterioration, and contained given that it is not yet widespread or severe. The Eurozone, which is very disjointed based on the extent of countries’ exposure to global trade and the manufacturing sector, provides a good example. After several years of low investment, companies are preparing to manage the slowdown without any surplus capacity (which is corroborated by the declining but still-high capacity utilisation rate) and are adopting a wait-and-see stance. They are not combating their eroding margins either by sharply reducing their capital expenditure or drastically cutting their workforce.

Catherine LEBOUGRE, Economist