Global economic growth in 2020 is expected to grow at a modest rate of around 3.4% compared to its long-term average of a 21st century average of 3.8% per year, according to new projections by PwC.
PwC forecasts that the global economy will advance from inertia, as long as trade tensions continue to create challenges for global supply chains and further integration of the global economy. Nevertheless, PwC expects that services will remain a bright spot for global trade, with the total global value of service export forecast to hit a record $7 trillion in 2020. ”Globalisation has been a defining feature of the global economy since the 1970s. Yet the global volume of merchandise traded slowed down dramatically and even went into reverse in 2019. Coupled with the effective disbandment of the World Trade Organization’s (WTO) dispute settlement mechanism in December, we can expect more challenging times ahead for global trade”, Barret Kupelian, senior economist at PwC UK, says.
"All the forecasts for Romania, including the most optimistic of 4.1% belonging to the government, indicate a slowdown of the economic growth for this year compared to the previous years, in line with the trend of the global economy. Therefore, a stable and predictable legislative framework, as well as public investments, especially in physical infrastructure could contribute to the economic activity. Unfortunately, the low level of budget revenue as a share of GDP and the rapid pace of increase in current state spending put pressure and limit the role of fiscal-budgetary policy in stimulating economic growth. In 2020 and even more in the coming years, there should be a consolidation of public finances by improving tax collection and recalibrating public spending to create a favorable investment climate”, Ionuț Simion, Country Managing Partner PwC Romania, says.
Major economies will continue to grow in 2020
In our main scenario, we expect all of the major economies to grow. US economic activity is likely to expand by around 2%, in line with its potential rate. The Eurozone is expected to grow at approximately half that rate (i.e. around 1%). Germany, and other economies that are sensitive to global trade flows, to become more reliant on household consumption as a source of growth instead of net exports and investment. In the emerging world, we expect the Chinese economy to expand by less than 6%. According to the IMF’s latest estimates, 2019 was the year when India overtook the UK and France to become the fifth largest economy in the world. This is an ongoing process with India likely on current trends to overtake Germany before 2025 and Japan before 2030 to become the world’s largest economy behind China and the US.
More jobs across the board but not necessarily spread equitably
PwC expect the G7 to continue to create jobs, to the tune of around 2 million. Four out of the five new jobs in the G7 will be created in the US, UK and Japan. As the pool of labour resources in the G7 gradually dries up, earnings will continue their upward trajectory. But in the absence of productivity improvements, corporate profit margins could be squeezed.
Global population biggest it has ever been but also the greyest
In 2020, the world’s population is expected to reach 7.7 billion, which is around a 10% increase compared to a decade ago. China, India and Sub-Saharan Africa are expected to drive around half of the world’s annual population increase. At the same time, the number of people above the age of 60 globally is expected to surpass the one billion mark.
Further predictions for 2020
According to the UN, Tokyo is expected to be the largest city in the world in terms of population, followed by Delhi and Shanghai.
Notes to editors
The full edition of Global Economy Watch - 2020 Predictions, with further forecasts and analysis, is available here: www.pwc.com/gew.
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Ionut Simion, Partner
Marketing and Communication Leader, Romania