Economic Outlook | Global Economy on the Road to Recovery in 2020
The preconditions for a recovery of the global economy in 2020 have significantly improved due to the following factors: (1) economic policy uncertainty has decreased; (2) the central banks of the largest economic areas have adopted noticeably easier monetary policies in 2019; (3) leading indicators on the global level already pointed to an upswing in economic activity in the 4th quarter of 2019. In view of trade barriers remaining in place, we initially expect just a slow, gradual recovery of the global economy.
We are forecasting stable GDP growth of +1.2% for the Eurozone in 2020. We expect that pressures from foreign trade and the reduction of inventories will ease. We believe this will be offset somewhat by a decline in the pace of domestic demand growth (particularly in investment spending, which benefited in 2019 from significant non-recurring effects related to Ireland). However, given the backdrop of a brightening global economic outlook there are upside risks to our growth forecast.
Headline inflation in the Eurozone should rise moderately to +1.3% in 2020. This forecast is based on the assumption of a largely stable oil price and an increase in core inflation to +1.2%. However, the emerging global recovery could, analogous to historical upswings, trigger a rally in oil prices. Moreover, persistent tensions in the Middle East may support oil prices. Thus our inflation forecast for 2020 is subject to upside risks as well. Regardless of this, the ECB will continue to focus on the trend in core inflation.
US economic growth has held up well, despite a difficult environment. We expect US economic growth to remain stable. As we envisage at least no renewed intensification of the trade dispute with China, no additional pressures should emanate from this front this year. In our opinion there are no signs of imbalances the correction of which could trigger an economic downturn. Overall we expect economic growth of just below 2% this year.