The probability of economic recession in the U.S. rose the most in the last ten years. Such data results the Federal reserve Bank of new York. Simultaneously with the financial problems in Europe and slowdown in China, international experts predict the onset of global recession in 2020. Markets fear an escalation of trade wars and, as a consequence of falling demand for products and lower prices for the energy commodities. The analysts are also concerned about the high debt levels of many countries and the growing threat of mass defaults. What can cause a new global economic crisis at RT.
The probability of a recession in the United States in the next 12 months reached its highest level over the past ten years. According to the Federal reserve Bank of new York, the corresponding value for the first time since 2009 exceeded 32%. Traditionally over the last 50 years the figure is above 28% of the experts associated with the inevitable arrival of an economic downturn.
The fear among economists was also causing the situation in the U.S. treasuries market (government securities of the country). To date, government bond yields of States with a maturity of ten years is 2.1% and remains lower than that of government securities with a maturity of three months (2,25%). According to analysts, this trend usually develops shortly before the start of the downturn in the economy and in recent times occurred in 2007.
“In practice the last decades this difference between the yields has served as a sure sign of the imminent recession in the US, because it means that the risk of short-term investment is estimated higher than the long-term,” — said in an interview with RT the head of a group of analysts CAPT mark in real.
An additional reason for concern in world markets became the first in 40 years, the threat of default in the United States. According to research bipartisan policy Center, against the background of record high national debt (the$22.4 trillion), and low budget revenues in September 2019, the country will not be able to pay the bills.
However, as explained in an interview with RT the head of the analytical Department AMarkets Artem Deev, the current state of Affairs in the US simultaneously with the financial problems in Europe (Italy and Greece) and a business slump in China risks to turn into a recession for the world economy as a whole.
“Now the global economy is in a more vulnerable position. The major economic cycles portend the onset of the crisis at the turn of 2019-2020”, — said the Deev.
Most financial Directors of leading companies in the world are predicting a General economic downturn in 2020. This is evidenced by the results of a recent study “Perspectives of global business” the American Duke University.
According to the analysis, in the USA 48,1% of respondents predict the economic downturn in the country in the second quarter of next year, and 69% are definitely talking about the onset of the recession by the end of 2020.
At the same time in Africa, 85% of financial Directors expect the decline in the region’s economy in the second quarter of 2020, in Europe, 63% in Asia, 57% in Latin America — 52%.
“For the first time in a decade, no region of the world was not in a sufficiently strong economic position to become the driving force of the world economy”, — said the Professor of Finance at Duke University and head of research John Graham.
The global recession in the year 2020 and predicts the well-known American economist, a Professor at new York University’s Nouriel Roubini. Earlier the scientist was one of the first predicted the onset of the global financial crisis of 2008 and the collapse of the cryptocurrency market.
According to him, one of the main causes of the next downturn in the world economy may be the aggravation of the trade war between the US and China. About Roubini wrote in his article on Project Syndicate.
“The administration trump may impose tariffs, Chinese exports worth $300 billion which has not yet been covered by the fees. Or the States can impose a ban against Huawei and other Chinese companies to use American components, which will trigger a full-scale process of de-globalization, as companies will try to secure their supply chain. In this case, China might respond in several ways, for example, to close its market to American multinationals like Apple,” said Roubini.
Recall that the trade confrontation between the two largest economies in the world began in the beginning of 2018. The US has accused China of illegally obtaining U.S. technology and intellectual property. According to the White house, China’s actions have led to the fact that the trade deficit of the States with the Asian Republic reached $375 billion
In may 2018, the two countries agreed on the peaceful settlement of the conflict, but the American side has decided to unleash a full-scale trade war and imposed duties on half of Chinese exports (by $250 billion). In response, Beijing introduced the tariffs at 5% and 10% on imports of American goods at $60 billion, after which Washington promised to impose duties on all shipments from China.
In December at the G20 summit in Argentina, both countries unexpectedly for observers, agreed to a truce. States promised not to raise duties on January 1, 2019, and the parties agreed to conclude the bargain till March 1.
It is noteworthy that the final agreement was not signed by the deadline, but the US never went to the aggravation of conflict against the background of a series of successful meetings between representatives of the two countries. However, in may 2019, the Washington has accused Beijing of delaying talks and increased duties on Chinese goods worth $200 billion, and has threatened to impose additional tariffs on products $300 billion Beijing, in turn, has imposed retaliatory duties of $60 billion as of 1 June. After that, the American technology company began to cease cooperation with the Chinese giant Huawei.
The results of the June summit, the parties again agreed to resume trade negotiations. However, experts remain fearful of the strengthening of the tariff conflict. As explained by mark Goikhman, to support their own manufacturers States can introduce new customs duties not only against China, but also in respect of goods from Europe, Canada and Mexico. According to experts, this situation will lead to a drop in global demand for products, resources, manpower, and undermine economic growth in the world.
Braking in German
According to experts, possible trade restrictions in the United States against the EU can particularly acute impact on Europe in terms of industrial decline in the region. For example, according to the latest data of the Bundesbank, in may factory orders of Germany decreased by 8.6% compared to the same period of 2018. The drop was the highest since November 2009. According to chief currency strategist at investment Bank Saxo Bank John hardy, available industrial statistics may indicate the gradual beginning of the recession in the country.
“It is obvious that in the manufacturing industry of Germany is declining. At the same time, the service sector and housing construction in the country yet have enough momentum to keep the economy on the brink of falling. But, of course, there is a serious risk that Germany is sinking into a new recession,” — said hardy in an interview with RT.
We will note, in June the business activity index (PMI) for the manufacturing sector of Germany fell to 45 points. The relevant data presented in the study of the analytical Agency IHS Markit. Traditionally, the indicator reflects the actual condition of the particular industry. A reading above 50 points indicates positive economic situation, below 50 points on the stagnation of the sector.
As noted by hardy, the threat of recession in Germany, Europe’s largest economy creates additional risks for the region as a whole.
With an eye on 2008
The expert of “international financial centre” Vladimir rozhankovsky believes that today the probability of a global recession in 2020 exceeds 50%. However, the expert does not forecast a repeat of the events of 2008-2009.
“It probably is a classical cyclical crisis, rather than on the global credit and financial disaster, as it was ten years ago. The reason for such a strong collapse is not, as to key financial markets (stocks, bonds, real estate) now there is a large number of risk products. Therefore, the situation is less explosive than in 2007,” explained rojankovsky.
At the same time, as noted by mark Goikhman, in the case of further strengthening of trade wars, States and large companies will be more difficult to repay their high debts. This situation may lead to a chain of defaults on debt obligations and negatively impact on world Finance. Against this background, according to analysts, most notably a new global recession may impact on the three largest world economies — US, EU and China.
“As the United States, Europe and China generate the most of global GDP and are deeply intertwined, the crisis of any of the participants could have serious consequences for everyone else. The same economy will have the highest damage in the event of a large-scale recession, as all three of the most heavily dependent on imports of goods and services. Followed by the same fall under attack countries that are owners of the national debt these three economies,” said Artem Deev.
Analysts say, in the event of world recession for Russia, the key risk could be a global drop in prices for energy sources. At the same time, it is expected that the economy will maintain a financial “safety cushion”.
“Russia today has a sufficient safety margin in order not to repeat the scenario of 2008. This triple surplus (budget, trade balance and balance of payments), and high volume of foreign exchange reserves, which only last month rose by 4.7% and exceeded the important level of $500 billion,” said the Deev.
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