China's 6% Growth Target Broken... Global 'R Fear' Eases

[Asia Economy Reporter Seulgina Jo] China's real economic growth rate in 2020 is expected to eventually fall to the 5% range. However, the so-called 'R (Recession) threat' that alarmed the world last year is assessed to have eased considerably. The value of the US dollar is expected to continue rising, while commodity prices are anticipated to decline.

Market research firm IHS Markit has released its 'Top 10 Economic Outlooks for 2020' with these details for the new year. IHS Markit forecasts that major economies will hit bottom and show signs of recovery this year, lowering the previously estimated nearly 30% chance of a global recession to 20%. The global economic growth rate this year is projected to slightly drop from last year's estimate of 2.6% to 2.5%, but it is expected to improve to 2.7% next year.

By country, the slowdown in China's economy, which continues its trade war with the United States, is evident. In particular, it is assessed that unless the Chinese government undertakes aggressive economic stimulus measures, a collapse of the growth rate below 6% is inevitable. China's Gross Domestic Product (GDP) growth rate is expected to record 5.7% this year and further decline to 5.6% next year. Compared to 10.6% in 2010, just a decade ago, this is nearly half. IHS Markit pointed out, "China's economic slowdown is not only due to the trade war but also a result of structural factors," adding, "Since the global financial crisis, China's debt-to-GDP ratio has more than doubled, tying the hands of policymakers."

IHS Markit expects the US growth rate to record 2.1% this year, significantly below the 2017-2019 average of 2.5%. The growth rate is forecast to slow further to 2.0% next year. However, the 2020 presidential election is considered a variable. The recovery of GM's production, which was hit hard by last year's GDP decline, and the Phase One trade agreement with China are also viewed as positive factors.

The Eurozone (19 countries using the euro), which had consecutive recession signals centered on Germany and Italy, is expected to regain stability this year. IHS Markit highlighted key indicators such as consumer spending, which recorded the largest increase in two years, and the manufacturing Purchasing Managers' Index (PMI), stating, "This suggests that the worst may be over in the Eurozone." The Eurozone growth rate is estimated to stabilize at 0.9% this year and recover to the 1% range in 2021. However, the UK, facing Brexit (the United Kingdom's withdrawal from the European Union), is predicted to struggle in the 0% range for the next few years as even the 1% growth rate collapses.

The value of the US dollar is expected to continue its upward trend this year as well. IHS Markit forecasts the dollar will rise more than 3% over the next two years. This is explained as entirely due to economic fundamentals, not the currency manipulation claims made by US President Donald Trump. Ironically, IHS Markit pointed out that the intensification of the US-originated trade war is sustaining the strong dollar trend, which weakens the export competitiveness of US companies.

Commodity prices are expected to decline. The average price of Brent crude oil is forecast to fall from around $64 per barrel last year to about $57 this year. IHS Markit expects the weakness in commodity prices to be prominent in the first half of the year, with some recovery appearing in the second half.

This content was produced with the assistance of AI translation services.