Relations between the United States and China are going through a difficult period, which can have serious consequences. According to experts of The Economist, this situation creates certain risks for the world economy and has a high probability of turning into a trade war.
World economy risks: market forecast by The Economist
For the U.S., a trade war with China could be a catalyst for economic recession, which is also facilitated by the debt of American companies. Due to the inflated situation, experts of The Economist, a specialized publication, have made a rating of risks for the world economy. In general, experts predict that indicators for all countries will deteriorate. This year the economic growth rate will decrease to 2.8%, and next year – to 2.6%. For comparison, last year the increase was observed at 2.9%.
Experts warn that the real figures may be lower than predicted, which is associated with various processes that have not yet been completed.
Geopolitical instability and growing debts of such countries as China, Italy, the USA and a number of others are worsening the situation in the world. Unless decisive measures are taken to control these processes, a significant economic downturn can be expected.
The main risk is the conflict between superpowers. According to experts of the magazine, the possibility of trade war between the U.S. and China is not ruled out, but the desire of the authorities to agree gives hope that an aggravation of the conflict can be avoided. But despite this, the last word remains with China, which will not go for demands to reform trade issues as the U.S. insists.
Experts warn that an aggravation of the conflict is possible in the near future, which poses a serious risk to the world economy. The catalyst for the worst scenario is the introduction of high import duties in a number of states and the creation of subsidies for local producers.
According to the forecast from The Economist, within two years, the U.S. economy will be able to resist, but the GDP indicators will drop to 2.3 this year and 1.5 next year. The real situation may be aggravated by instability in the US financial segment.
For a long time low interest rates have been observed here, resulting in an increase in the debt of companies to 47% of GDP. This is even higher than the peak that was observed after the global crisis in 2008-2009.
The world economy of developing countries is also at risk of recession. Investment outflows, trade wars of giant powers are affecting processes in other countries. Decline in GDP is predicted in many countries, especially where there is instability in the geopolitical sphere.