Page 25 - WEF Reoprt 2020

The global economy is at risk of stagnation. Going forward, rising trade tensions, lower
Rising trade barriers, lower investment and investment, weak confidence and high debt
high debt are straining economies around risk a prolonged slowdown of the world
the world. The margins for monetary and economy. At the time of writing this report,
fiscal stimuli are narrower than before the IMF had lowered its last five estimates
the 2008–2009 financial crisis, creating of world output for 2019 and expected a
uncertainty about how well countercyclical growth rate of 3.0%—a sharp decline from
policies will work. This uncertainty is 3.6% in 2018 and the slowest since the 1.7%
exacerbated by a tense geo-economic contraction in 2009. For 2020, the IMF had
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and geopolitical landscape (see Chapter also downgraded its forecast from 3.7% to
1, Global Risks 2020), as well as by 3.4% (see Figure 2.1).
domestic challenges. Profound citizen
discontent—born of disapproval of the way Trade tensions
governments are addressing economic and “Economic confrontations between major
social challenges—has sparked protests powers” is the most concerning risk for
throughout the world, potentially weakening 2020, according to members of the Forum’s
the ability of governments to take decisive multistakeholder community; this is the
action should a downturn occur. same risk our multistakeholder network
rated as the top risk last year. It is clear why
short-term economic risks ranked high in
Economic risk factors are the Global Risks Perception Survey: global
trade, which for decades has been an
compounding with engine for growth, is slowing down. World
Trade Organization (WTO) data for the first
widespread domestic three quarters of 2019 shows that total
world merchandise trade decreased 2.9%
discontent towards from the previous year (see Figure 2.2)—it
decreased in the world’s top ten traders.
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economic systems Reduced trade volumes are largely the
result of what the WTO has called
“historically high levels of trade restrictions”. 5
The potential result, according to the IMF,
Macroeconomic risk factors could be global growth slowing by 0.8
percentage points in 2020, should the
During the last decade, moderate but United States and China uphold existing
stable growth has given way to what the tariffs or implement new ones. While
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International Monetary Fund (IMF) has called a progress was made in late 2019 between
“synchronized slowdown”—weakened growth the United States and China towards a
among the world’s economies. We cautioned trade agreement, the effects of having
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in last year’s Global Risks Report that a gradual turned trade from an instrument of
deceleration was underway, and the evidence cooperation to a weapon of rivalry
suggests that, since then, the slowdown of the may persist.
world economy has further materialized. By the
third quarter of 2019, six of the world’s largest Lower investment
seven economies (Japan is the exception), Investment is indispensable for boosting
which together represent more than half of productivity. Globally, investment has been
global production, had decelerated. The outlook affected by low expected returns, uncertainty
is also precarious for other G20 economies. about economic policy in major economies,
Except for Indonesia and South Korea, these and ongoing and emerging geopolitical
economies are growing at a rate below 2%— tensions (see Chapter 1, Global Risks 2020).
with Argentina and Mexico contracting in the In our survey, “protectionism regarding trade
third quarter of 2019. These trends likely explain and investment” and “populist and nativist
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why our multistakeholder community rated agendas”—two major obstacles to the free
“recession in a major economy” as the ninth flow of foreign direct investment (FDI)—were
risk most likely to increase in 2020 (see Figure rated as the fifth and sixth risks most likely to
1.1 in Chapter 1, Global Risks 2020). increase through 2020.

20 The Fraying Fundamentals