Why the global economy is facing many uncertainties and how could it impact?

global economy


  • The tariff war between U.S. and China triggers an economic slowdown around the world.
  • The Covid situation has sifted the Global supply chain from one region to another one.
  • As per Bloomberg reports – in upcoming years, the Global economies will face many uncertainties 
  • In 2017, World GDP was at 3.8 percent, which is 2018, fell to 3.6 percent, and in 2019 world GDP is now projected to be 3.2 percent.
  • The annual data for the past 2 years, and also quarterly numbers on the world trade, capital flows, and economy suggest that the world economy is on the edge of a recession.
  • In 2017, World GDP was at 3.8%, which fell to 3.6% in 2018, and in 2019, it is projected to be 3.2%.

Global status

  • The two major groups — 23 Emerging Economies and 39 Advanced Economies 23 Emerging Economies— from the past two years have been experiencing a downturn.
    • While Advanced Economies are projected to rise at 1.7 % in 2019 from 2.4 % in 2017, Emerging Economies are set to experience 3.8 % growth in 2019 from 4.8 % in 2017
    • Although the IMF projects a better picture  for Advanced Economies and Emerging Economies in 2020, it is difficult to predict given the geopolitical uncertainty, escalating trade war between China and US, and lack of consensus among the G-20 and the G-7 member countries to push world trade and growth
  • It is clearly projected that there is a Downward trend or slump in capital flows and the stock market is making Investors worried about the slump.
  • The growth of trade volume for Advanced Economies is projected to be 1.6% in 2019 from 4.4% in 2017 whereas for Emerging Economies trade is expected to grow at 1.5% in 2019 from 7.4% in 2017.
  • Although the International Monetary Fund had forecasted an upward growth for world trade in 2020, there is strong uncertainty because of the ongoing US-China trade war.

The world’s top 10 economies

  • While the US, the largest economy in the world, has a projected growth of 2.3% in 2019 from 2.9% in 2018, China is growing at its slowest pace in the last 3 Decades — it is the China-US tariff war affecting trade worth billions of dollars.
  • Germany, which is the 4th largest economy in the world, heavily relies on automobile exports to the China and US.
  • It is reported that the British economy is shrinking primarily due to the fears of a chaotic Brexit without cutting a deal to protect its trade. The downward trend of Italy is because of weak productivity, unemployment, regular political upheavals, and huge debt.
  • For the last few months US-China countries are dropping and resuming bilateral talks intermittently — As the US-China Tariff war is escalating – the world economy is going under immense uncertainties and by 2021 this uncertainty could lower world GDP by 0.6% – as per Bloomberg reports,
  • The GDP of Hong Kong and exports have been worst affected in Financial Year 2019 owing to setbacks in Asian trading, manufacturing, and investment.
  • Moreover re-imposition of US sanctions on Iranian oil not only affected Iran’s economy and price levels, which is leading to a weak currency, but it also led to oil price volatility and disruptions in the supplies of oil.

Multilateral Organizations

  • In such a situation, when the world economy is staring at a recession, it is becoming increasingly important to leap forward for international cooperation through forums like the G-20 and the G-7 to revive growth and world trade
    • Although the G-7 leaders have called for boosting globalization through fair trade and efficiency.
  • However, they also showed concern on how to safeguard the rule-based trading system led by the World Trade Organization through modernization and reforms, quicker settlement of trade disputes, and improved intellectual property protection.