Weakest Economies of Year, What to Expect From Central Banks

Last year, there was registered a slackening in the global economy growth as well as lack of new ideas to prop it up, but for some the slowdown affected some countries more than others.

If we consider the most developed economies, then among the first ones, of course, there will be Great Britain and the uncertainty that continues in connection with the country's exit from the EU - a process that literally paralyzed local businesses, and with them the general activity of consumers. As a result, the British economy is showing the slowest growth pace last time seen during the Second World War, not taking into account the recession time.

The flow of investments was declining, but bond rates began to grow after a 10-year period of decline. The measure of business sentiment also leaves much to be desired.

According to experts, economic growth in the previous year was only 1%. The further course of events will entirely depend on the British Prime Minister and negotiations with Brussels, the conclusion of potentially new trade agreements, as well as the actions of the country's main bank, where the chairman will be replaced as it is planned in March this year.

Market experts opinion divided, some give positive forecasts, others are pessimistic about the foreseeable future.

Meanwhile, Asian countries remain the leaders of global economic growth over the past few years, although with regard to last year's data, most likely the indicators will not be so significant, one might even say very modest, the IMF predicts.

The GDP of Asian economies is estimated to show a 5 percent increase. The growth rate was limited due to a trade spat between the United States and China, but with Phase One signing everything may change. By the way, economic growth in China has been the most minimal over the past 27 years.

Markets were further excited by the events in Hong Kong, where in Q3 GDP fell to the bottom by 3 percent on annual basis.

The situation is even worse in Venezuela, since according to rough IMF forecasts, the GDP in the country in 2019 will register around a 35% decline. During Maduro’s reign, the Venezuelan economy went significantly down and oil sales fell from $85.6 billion to $29.9 billion

A similar GDP lowering  was registered in Nicaragua and Zimbabwe, if such a comparison is appropriate.

Significant events in 2019 took place also in Argentina, where a change of power followed, and all of a sudden one, dragging the local currency to the bottom by more than 10 percent.

Nevertheless, the situation in the economy does not look so dilapidated as analysts had expected, although it is too early to talk about a significant positive mood.

The decline in the Q3 2019 was of 1.7 percent on year-on-year basis; it followed the short-term growth of the economy, which showed an increase of 0.6 percent in the Q2 for the first time since early to mid of 2018.

Latin America's 3rd largest economy has shrunk by 2.5 percent since the beginning of the previous year. But no final data for the year results followed in connection to some crucial power changes. 

It’s vital to remind, that the Argentinean government brought to default on dollar treasury bills, and payments to creditors were delayed till the end of August this year.

Lower rates in 2020: what will be the year for central banks?

The central banks of developing countries can begin 2020 with a new easing of monetary policy, which may support the global economy, as developed countries have almost exhausted the possibilities of monetary policy.

Regulators of Thailand and Argentina recently made it clear that they intend to act, while economists predict further easing of policies, albeit limited, in Indonesia, Russia, Turkey and other countries, Bloomberg writes. In connection with the events in Russia, a further reduction in the rate by the central bank is taking a break, but Turkey is again reducing interest rates by 75 bp, from 12 percent to 11.25 percent.

The head of the central bank of Thailand said in an interview with an agency in Bangkok last week that additional measures would be taken to ease restrictions on capital outflows in order to stop currency appreciation.

The new president of the central bank of Argentina promised to lower the rate again in order to support the free-fall economy, despite the fact that the rate in this country is at 58 percent and remains the highest in the world

Modest acceleration

The World Bank's published forecast prompts a modest acceleration of global economic growth in 2020 from last year’s 2.4 percent up to 2.5 percent - mainly due to stabilizing the growth of a few of the largest EM countries. Only eight markets should provide approximately 90 percent of the expected acceleration, including Saudi Arabia, Argentina, Iran, Brazil, India, Mexico, Russia and Turkey.

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