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Eight countries, including two in Latin America, show signs of possible global recession



Last week, the Stock Exchange saw its biggest decline on a single day last year.Image copyright
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Last week, the New York Stock Exchange saw its biggest decline for a day so far this year.

The world economy is well advanced. Or maybe not so?

The IMF projected global GDP growth of 3.2% in 2019 and 3.5% in 2020. They are not negligible numbers.

However, the dominant climate in international markets is not satisfactory, but rather Anxiety that "deepens every day", as noted in a recent editorial Economist.

Investors' nervousness becomes apparent in the conduct of the exchange, but especially in the types of operations they perform.

The price of gold, a haven of excellence for the metropolis, He has been at the top of the last six years.

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At the same time, demand for government bonds from strong and predictable economies such as Germany and Switzerland remains, though offer negative interest rates.

And while the United States enjoys the lowest unemployment rate in half a century and the longest period of economic expansion in its history, voices predicting the end of the good rate will multiply.

Some point out that the US economy has seen an upside curve (or "yield curve") for five months, a phenomenon that occurs when interest rates on long-term government bonds are lower than the Short-term and usually predicts a crisis.

"Recession" seems to be a key word among analysts, but why are these negative expectations expected if global GDP continues to grow and a severe crisis has not yet erupted?

The answer seems to be in the problems that some of the key economies of the world present. BBC World tells you what those countries are.

1. United States

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Trump's trade war with China has created a great deal of uncertainty in the markets.

With expectations of 2.6% growth for 2019 (the highest rate within the G7, which brings together the most industrialized countries), the United States appears to be doing well.

"Our economy is the best in the world so far. The lowest unemployment ever recorded in almost all categories. Headline for big growth after the trade deals are concluded, "Donald Trump said on Twitter last week.

However, analysts fear that a trade war with China will eventually drive the country into recession.

  • 3 indicators that contradict the predictions that the US economy is heading into recession

Apparently aware of the potential "collateral damage" of that confrontation, Trump postponed last week until after December 15 the expected increase in tariffs on Chinese products.

Despite this, the clash between Washington and beijing causes influences that transcend these two countries and is considered a central element that can be crucial in triggering an international recession.

2. China

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Although growing at an impressive 6%, the Chinese economy is gradually cooling.

China's economy continues to record a significant 6% growth rate. However the youngest that country has registered in the last 17 years.

The stalemate is partly due to efforts by President Xi Jinping's government to try to get the country to grow into higher-level sectors such as services and high technology, but also because of a reduction in the returns derived from his state model of capitalism, which shows what some analysts consider "signs of exhaustion".

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In recent years, the state has increased control over the economy to the detriment of private actors, and most new bank loans have been directed at public companies.

Also industrial production fell in July to its lowest point in 17 years, something that can be partially attributed to the tariffs imposed by Trump.

The measures taken by Washington have also caused exports to slow down, which has implications for the world economy.

3. United Kingdom

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The Brexit process has opened up huge uncertainties around the United Kingdom.

During the second quarter of 2019, the UK economy shrank by 0.2%.

Faced with this phenomenon, analysts attribute their economic difficulties to doubtrelated to the process of leaving the European Union (EU), known as Brexit, was originally scheduled for March 29th.

The current prime minister's promise, Boris Nonson, to make Brexit a reality on October 31 – whether it's an agreement or with the EU – and the current British parliament's attempts to avoid a deal without a deal, to add more gasoline to the flames of uncertainty

Since holding a close referendum that decided to leave the UK in June 2016, pound sterling ranged from $ 1.46 to $ 1.21.

4. Germany

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The large export capacity is characteristic of the German economy.

Seen for decades as the economic locomotive of the European train, the German economy fell by 0.1% during the second quarter of this year.

Known for its large export capacity – especially machinery, trucks and vehicles – it is precisely in this sector that the German economy collapsed, driven by a sharp decline in sales, especially those directed to China.

Annually, export from Germany fell by 8%.

  • Why Germany stagnated and what this reveals about the worrisome state of Europe's economy

This situation has led some analysts to predict that the country is headed for an immediate recession.

If that happens, the world's fourth economy has a good fiscal surplus of 7.4% of GDP that will allow it to have the means to stimulate the economy.

5. Italy

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This year, Italy's olive oil production fell to its lowest point in 25 years.

With debt exceeding 130% of its GDP and a stalled economy slipping by 3% between 2008 and 2018, many believe that Italy can become the new source of economic instability within the European Union.

Its banking sector, in which financial institutions have interests in other parts of Europe, seems burdened with debt that is difficult to collect.

In the meantime the manufacturing sector is struggling – albeit with unsuccessful results– before competition from China.

6. Brazil

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Bolsonaro's coming to power in Brazil did not bring the growth expected of the markets.

A decade ago, Brazil was highlighted as a member of the Brix, a group of emerging economies with accelerated economic growth rates (the other members being Russia, China, India and South Africa) that would surpass developed countries in 2050.

The results of the last decade, however, They cast serious doubt on the possibility.

In the months before Bolsonaru's election as president, markets created favorable expectations for the country.

However, less than a year after he came to power, prospects for significant growth are postponed to 2020.

Much of the bad prospects Brazil is facing are due to problems elsewhere.

Among them are the economic crisis in Argentina, its neighbor and partner in Mercosur; growth slowdown in China, what now it wants to import less raw materials from Brazil; as well as fears that their sales in the US may fall. as a result of the trade war between Washington and Beijing.

7. Argentina

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Alberto Fernandez's great election triumph in Argentina has provoked a strong backlash from the markets.

The recent Buenos Aires (Merval) Stock Exchange has suffered after the recent first elections in Argentina, whose results foresee a very likely return to the power of Peronism. second biggest decline registered in the world since 1950.

In addition, the price of the nation's bonds dropped to 54 cents on the dollar, meaning markets They believe it is very likely that the country will default on its debt.

Between August 9 and 14, the Argentine peso's dollar to dollar ratio increased from 45 to 1 to 60 to 1.

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But the economic hardship has not begun with these election results. Argentina has been in recession for the past year and has an inflation rate of over 50%.

The poverty rate is already 35% compared to 27.3% in the first half of last year, according to the Catholic Debt Observatory at the Catholic University of Argentina.

These factors appear to be fundamental to the election defeat suffered by President Mauricio Macri.

However, the prospect of a final triumph over Peronist's candidacy set up by Alberto Fernandez as Presidential candidate and Christina Fernandez de Kirchner as Vice Presidential candidate creates strong fears in markets, where many are beginning to take them for granted. that Argentina will default on its debt.

8. Singapore

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The collapse of Chinese tourism is balancing Singapore's economy.

The possibility of a recession is rising in the near horizon of Singapore's economy, after its GDP fell by 3.3% in the second quarter of this year.

The poor results are mainly blamed on analysts decrease in exports of manufactured goodsas well as the decline in sales as a result of the decline in Chinese tourism.

Thus, Singapore will be another collateral victim of the Washington-Beijing trade war.

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