Global economic growth slowing, prompting fears of recession . . .
As the U.S.-China trade war continues to escalate, the pace of global economic growth is slowing. In June, the World Bank Group forecast global economic growth to be 2.6 per cent in 2019 and 2.7 per cent in 2020, a 0.4 per cent drop from the 3 per cent growth in 2018. While the projected slowdown cannot be attributed solely to the trade war, the report points to the growing risk of rising trade barriers as a contributory factor, while global trade growth has reached the lowest level since the 2009 financial crisis. In May, the International Monetary Fund estimated that the trade war could cut 0.3 per cent off of the global GDP in the short term.
Impact on Asia Pacific economies . . .
Economic growth in the Asia Pacific is also projected to slow, from 6.3 per cent in 2018 to 5.9 per cent in 2019 and 2020. If the forecast is correct, this will be the first time the region’s economic growth will have dropped below 6 per cent. Sitting front and centre, China’s GDP is estimated to slow from 6.6 per cent in 2018 to 6.2 per cent in 2019. Other economies in the region, such as Cambodia, Malaysia, and Vietnam, are also expected to grow at a slower rate than in 2018.
Canadian economy expecting slow growth . . .
Earlier today, the Bank of Canada announced that it will hold its interest rates steady at 1.75 per cent, while anticipating an economic slowdown in the second half of the year. In its press release, the bank said that because the negative effects of the trade war between the U.S. and China were more significant than the bank’s previous projection, the current rate of stimulus remains appropriate. A research note published by the Bank of Canada earlier this year also warned that a modest escalation of trade tensions could lead to rising prices and falling real GDP in Canada.