BUSINESS MAVERICK ANALYSIS: Finding a way out of the great global growth slump

The world has got itself into what threatens to be an intractable global growth quagmire and, with all the geopolitical and economic headwinds currently at play, getting out of it could see policymakers forced to resort to extraordinary measures. Failure to take action could result in a crisis that would make 2008 look like child’s play.

World growth forecasts released on Tuesday 15 October, along with the latest World Economic Outlook showed growth for 2019 revised downwards to 3% from its previous 3.2% forecast. More notable is the fact that in its January 2018 WEO, ironically titled “Brighter Prospects, Optimistic Markets, Challenges Ahead”, the IMF predicted that 2019 growth would come in at 3.9%, which shows the impact trade tensions have had since trade talks began between the US and China in May last year.

Secondary costs are the most worrying and far higher than the direct costs of trade tariffs. These include the loss of confidence as a result of the tariffs, market reactions to the trade tensions and lost productivity as a result of the manufacturing industry and supply chain responses to the implementation of tariffs.

Other major headwinds confronting the global economy are the escalating geopolitical risks in Syria and the Middle East, with Saudi Arabia and Iran swapping accusations regarding the damage to oil facilities and tankers. The IMF believes only globally coordinated policy responses will fix the fractures in the economy. Georgieva says we should improve the current system, not abandon it. A tall ask, given that trade tit-for-tats have already sent the world down a path that ultimately leads to further global fragmentation.

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