Economic Outlook for 2020

As we enter into a new decade, the global economic outlook is far from certain. According to the October 2019 report from the International Monetary Fund (IMF), Global Manufacturing Downturn, Rising Trade Barriers, the global economy is in a synchronized slowdown, with growth for 2019 downgraded to three percent – its slowest pace since the global financial crisis.

“This is a serious climb down from 3.8 percent in 2017 when the world was in a synchronized upswing. This subdued growth is the consequence of rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and aging demographics in advanced economies,” wrote Gita Gopinath, economic counsellor at the International Monetary Fund in the foreword of the report.

The International Monetary Fund predicts global growth in 2020 to improved modestly to 3.4 percent. However, the report cautions that growth is not broad-based and is precarious. Growth for established economies is projected to slow to 1.7 percent in 2020. Emerging and developing economies are projected to experience a growth pickup of 4.6 percent in 2020.

IMF attributes about half this growth being driven by recoveries and shallower recessions in emerging markets, such as Turkey, Argentina and Iran, and the rest in countries where growth slowed significantly in 2019, such as Brazil, Mexico, India, Russia and Saudi Arabia.

“A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade,” said Gopinath. “A few factors are driving this. Higher tariffs and prolonged uncertainty surrounding trade policy have dented investment and demand for capital goods, which are heavily traded. The automobile industry is contracting owing also to idiosyncratic shocks, such as disruptions from new emission standards in the euro area and China that have had
durable effects.”

For the U.S., trade-related uncertainty has had negative effects on investment, but employment and consumption continue to be robust, buoyed by policy stimulus. In the euro area, growth has been downgraded due to weak exports, while Brexit-related uncertainty continues to impact growth in the UK.

Heading into 2020, it will be interesting to see how the current political and economic challenges play out and see the impact they will have on the paint and coatings industry.