World Could 'Fall Flat on Its Face': Grim Forecast for Emerging Economies

So-called emerging economies — China, India, and Brazil — are expected to grow slower in the coming year than previously expected, according to the Centre for Economics and Business Research (CEBR).

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CEBR’s 2019 World Economic League Table expresses optimism that these countries will grow in the medium term, “but suspect the route to growth will be more bumpy than assumed 12 months ago.” The annual report forecasts out the fortunes of 193 countries until 2033.

For example, China is likely to overtake the United States as the world’s largest economy in 2032, rather than 2030 as the organization previously predicted. The economists say this is  due to an expanding fiscal deficit of about three percent since 2014 and U.S. President Donald Trump’s trade war with its own biggest trading partner, which experts say, has stymied world trade growth in general during 2018.

Brazil’s economic worth is expected to surpass Italy’s in 2020, not this year as was previously thought. The same scenario is expected as India takes over Britain and France’s economic slot in two years, not in 2018 as was predicted a year ago.

The CEBR prediction for Argentina’s economy, however, is dire.

They estimated that the country’s gross domestic product (GDP, or total market value in currency) will decrease by 2.6 percent this year and 1.9 next year as “the government’s austerity programme starts to bite. This marks the worst economic crisis for Argentina for a decade.”

President Mauricio Macri’s US$56.3 billion International Monetary Fund (IMF) loan has backfired as he and his economic team continue to sell off billions of local and U.S. currency in short-term bonds with 11-70 percent interest rates. U.S. economists say both are culprits in the country’s inflation surge to 45 and 50 percent, and peso devaluation to the same rate since April.  

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“Because of the scale of the (Argentine) crisis this year and its … mix of high inflation and negative growth, we have had to revise down our forecasts for (the country) sharply from last year,” said CEBR saying that Argentina’s economy fell from being the 21st largest economy in December 2017 to 26th currently. It is “predicted to fall to 30th in 2019,” reads the report.

Overall, markets have weakened this year globally: “With debt high and many of the structural problems that caused the great recession still in existence, a global recession could be more difficult to resolve than its predecessors,” the CEBR .

“We’re in a world now where there’s a sense that a certain degree of fiscal action will have to be applied in order to avoid the world falling flat on its face,” deputy chief of CEBR, Douglas McWilliams, told Reuters.

However, McWilliams and his team say that “global mega projects such as the Chinese Belt and Road Initiative and the Indian infrastructural project ... are likely to change the shape of the world economy.”