Coronavirus, U.S.-EU trade war, Gulf tension biggest threats to global economy: EIU

According to a whitepaper released by The Economist Intelligence Unit (The EIU), global growth is forecast to be 2.9% in 2020, close to decade lows.

February 26, 2020 06:59 pm | Updated November 28, 2021 11:23 am IST - New Delhi:

The growth outlook for 2020 appears bleak, The Economist Intelligence Unit said on Wednesday and cited coronavirus , the U.S.-EU trade war , and the U.S.-Iran conflict as the biggest threats to the global economy.

According to a whitepaper released by The Economist Intelligence Unit (The EIU), global growth is forecast to be 2.9% in 2020, close to decade lows.

The EIU expects economic growth in the developed world to slow in 2020, driven by a moderation in the U.S. growth. While, the emergence of a novel coronavirus in China will dampen Asia’s growth perspectives .

 

The report titled the “Top five risks to the global economy in 2020” further noted that the social unrest seen across the world in 2019 looks set to continue in 2020 and will challenge both policy-makers and business models.

The EIU jotted down top five risks and their respective likelihood on the global economy , in which the U.S.-Iran conflict leading to a spike in global oil prices and trade war between the US and the EU topped the chart with 25%.

Other major risks to the global economy include coronavirus, debt burdens causing a recess across emerging markets and Hong Kong protests causing an exodus from Asia’s biggest financial centre.

The EIU said the trade truce between the U.S. and China remains “fragile”, and a flare-up in tensions between the world’s two economic superpowers cannot be excluded.

According to Agathe Demarais, the EIU’s Global Forecasting Director, the risk of an unintended slide into an escalating military conflict between the U.S. and Iran cannot be ruled out.

On coronavirus, the report said that its impact is set to be more profound than that of Severe acute respiratory syndrome (SARS), owing to the much larger role that China plays in the global economy.

The EIU expects a 20% probability that the virus will not be contained in China until mid-2020, and a 5% chance that it will remain uncontained beyond 2020.

Disruption of international trade would become entrenched as supply chains are diverted from China with some countries possibly placing heavy restrictions on bilateral trade, it noted.

Moreover, a growing number of international exporters would experience financial distress, as a persistent shortfall in Chinese demand depresses commodity prices and export revenues.

“Taking into account the direct impact of weaker demand in China, as well as potential economic disruption in other countries should the coronavirus outbreak spread further globally, our forecast for global real GDP growth could dip below 2.5% this year,” The EIU noted.

On January 30, the World Health Organization (WHO) declared the coronavirus (COVID-19) outbreak a global health emergency.

The death toll in China’s novel coronavirus epidemic on Wednesday climbed to 2,715 with 52 new fatalities while the confirmed cases rose to 78,064.

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