It is the best time to predict what will happen in 2020. According to Morgan Stanley, the global growth is predicted to recover during the Q1 in 2020. When the trade tension also monetary politic ease, the downside trend of economic will reverse immediately. Easing trade tensions will reduce business uncertainty. Therefore, the policy stimulus will be more effective. The Morgan Stanley firm projects that the global economic growth will reach up to 3.2% in 2020. It is much better than the economic growth rate in 2019 which is about 3%.
However, the world economy still relies on the outcome of the US and China trade talks. It also depends on how Trump is going to make some decisions in the United States. If Trump decides to have the next round of tariffs this year, the global growth in the Q1 in 2020 will slow down to about 2.8%. The recovery will be postponed until the third quarter of 2020. The economic growth still depends on the activity of trade war between the United States and China. Both countries play an important role in determining the whole economic growth in the world.
Optimism about the conversation between the US and China can lift the Dow Jones Industrial Average to a high record, especially after White House Economic advisor, Larry Kudlow says about the deal is about the achieved. Both Chinese and United States media state that the US and China is going to have a constructive discussion over the weekend. This deal can increase optimism among a lot of people from around the world. When people are optimistic about the next economic growth, all industrial sectors are going to develop well immediately. You will find that the economy is going to develop well from time to time.
However, the idea of easing down the tariff has already divided the White House into two parties. Trump said that he hasn’t committed to lifting any administration duties against Chinese exports. China is also reported to be reluctant in committing to purchase up to $50 billion in US agriculture goods, as a key demand from Trump. This fact still holds the trade tension at a high level. Up to 20 central banks are trying to decrease the interest rate with easing on the horizon. We are going to expect to see more easing that is coming in 2020. The overall global weighted average policy rate will touch a seven-year low at the end of the first quarter in 2020.
The Federal Reserve is also trying to reduce the rate by up to 75 basis points this year. This cut is going to lift private demand, consumer durables, and also drive housing demand. It will help stabilize the economic slow down that may occur in the United States. As a result, many people get a lot of benefits from this interest rate reduction from the Federal Reserve. The low-interest rate is predicated to give a positive lift on the economic growth in 2020. Economic growth is predicted to grow well and quickly this year.
According to the Fed Chairman, Jerome Powell, the rates are unlikely to change in the next few months. This low-interest rate is going to stay for maintaining the economic situation to stay well in this present path. Morgan Stanley also expects that the Fed is going to hold the interest rate steady in this 2020 year. However, the interest rate is predicted to hike in the second half of 2021 once the inflation hits about 2.5%. The interest rate will depend on the inflation rate that may occur in 2020.
Though the US economy is still on the solid footing, the Morgan Stanley still sees uncertainty that is still surrounding the trade policy. It can be the downside risk during the looming 2020 presidential election. The uncertainty about the economic policy will weigh more on business and also household decisions in 2020. You will see a lot of uncertainty things that may occur this year. Therefore, you have to prepare yourself for facing this situation in 2020. The monetary policy and fiscal policy can affect the overall global economic growth this year.
