Global growth is expected to remain at 3.0 per cent in 2019 and 2020, however, the steady pace of expansion in the global economy masks an increase in downside risks that could potentially exacerbate development challenges in many parts of the world, according to the World Economic Situation and Prospects 2019. The global economy is facing a confluence of risks, which could severely disrupt economic activity and inflict significant damage on longer-term development prospects. These risks include an escalation of trade disputes, an abrupt tightening of global financial conditions, and intensifying climate risks, the UN report says. Some key conclusions follow:
Europe will continue to see robust growth of 2.0 per cent in both 2019 and 2020, driven mainly by solid household consumption propelled by lower unemployment, rising wages and the continued stimulating monetary policy stance. On the business side, companies, especially in the construction sector, also continue to benefit from the expansionary monetary policy stance. The overall regional growth profile traces the performance of the largest economies in the region.
In Germany, growth will remain at a slightly more moderate level of 1.8 per cent in 2019 and 2020, as the external environment is becoming less supportive. The important car industry is facing disruption and pressure through new technologies, new competitors and significant legal and financial consequences from past sales practices related to the diesel technology. By contrast, private consumption remains a major driver of growth, given a strong employment picture that is increasingly feeding through to higher wages.
Those members of the EU that joined the Union since 2004 have sustained the buoyant economic dynamism from 2017, with GDP growth often exceeding earlier forecasts. The aggregate GDP of these countries has expanded by 4.2 per cent in 2018, well above the EU average. In Poland, the largest economy in the group, growth is estimated at 5.0 per cent for 2018. Export performance of the Eastern European industrial sector remains one of the key growth drivers. Output of the automotive industry, after reaching record highs in 2017, remained strong, and the sector is attracting massive new investments despite rising wage costs.
Private consumption, boosted by tight labour markets, a surge in nominal wages, and mostly loose monetary policy, has also notably contributed to growth, becoming the main engine of the Polish economy. However, economic activity in the group is expected to moderate in 2019–2020 as global trade tensions may negatively affect exports, and the consumption boom should slow in response to inflation, according to the report.
14th January 2021