Sunday, September 15, 2019
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< view full issue: Readjustment or economic crisis for this 2019
Carmen P. Flores

​New economic clouds on the horizon, this 2019?

Editor of TEJ. Journalist

Since the end of last year, voices began to be heard that announced, with more or less insistence, the possibility of a readjustment or economic crisis for 2019, when still the public at large and most companies still have not yet emerged from that scourge. It has been punishing the European economy for ten long years; now, the shadow of a new one puts sets off the alarm in all the economic sectors.


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The theory of economic cycles is not an exact science, nor does it conform to a particular pattern; the last one that occurred in Europe, has lasted for 15 years, they say, being the longest in the last 50 years.


Trade and geopolitical tensions between the United States and China following the tariffs imposed by Trump against Beijing, and vice versa, were an influencing factor, although in December last year both governments temporarily suspended the imposition of new tariffs to cool strains. The tranquillity didn't last long. Trump has returned to the old ways with new package of tariffs on Chinese products. We haven't had to wait long for the reaction, and the Chinese Minister of Commerce has declared that "this means war", the United States has just started the largest trade war in history so far, the Chinese president said. Given this scenario, the measures taken by Trump, which some consider an unnecessary and dangerous provocation, pose a considerable threat to the global industry, markets, economic recovery and output chains.


The commercial-political crisis between the first and second world economic powers is not the only factor that points to a possible new crisis, the outlook becomes worrying because of the shocks that the European Union is going through. The horizon becomes gloomy due to the convulsions that the European Union is experiencing due to the increasingly complicated Brexit, the debt crisis caused by the Italian government and the possible sanctions on Hungary and Poland.


A Brexit without agreement would lead to British GDP to fall between 5% and 8% in the long term, as highlighted by Gopinath.


This climate of uncertainty has led international institutions to lower their forecasts for 2019, much to their dismay.


According to the International Monetary Fund (IMF), the world economy "is weakening at a somewhat faster rate than expected" and as downside risks are rising, among which it cites trade tensions and tougher financial conditions, but in addition, a Brexit without agreement and a more pronounced deceleration than expected of the Chinese economy.


Several risks that are increasing, says the Fund, which nevertheless has not adjusted its forecast for the United States (2.5%).


"If we add the uncertainties, the geopolitical concerns and the disappointing long-term growth projections, we have an economic outlook with quite a clear message for political leaders: resolve the vulnerabilities and be prepared in case a serious slowdown materializes". This is how the managing director of the IMF, Christine Lagarde, dismissed an imminent recession: "Is a global recession just around the corner? The answer is no".


Not only that, but according to the IMF report emerging countries will be held back by the contractions in Argentina and Turkey - which will be more significant in the case of Istanbul, which will last until at least 2020.


In Latin America, the IMF expects lower growth for Mexico in 2019, with an expansion rate of 2.1% this year, four tenths less than in October. In the case of Brazil, the institution projects a growth rate of 2.5% in 2019, one tenth more. Meanwhile, the recession will be "even more severe" in Venezuela.


Meanwhile in Spain, immersed in electoral campaigns and other issues, the economic uncertainty and the effects of a readjustment plans hovers over us, although the experts do not agree on its depth.


With this unpromising picture, in this issue of TEJ you will find diverse opinions to help you understand something about the gurus' predictions.

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