2019 Records Worse Global Economic Performance in Decade

Figures of disappointment have cased shadow over the global economy, making 2019 the worst annual performance since the global financial crisis.

Years of recovery started to appear at the end of 2018, with the fact that it was also the year in which the major central banks moved away from stimulus policies slowly.

But these signs have turned into a reality over time, reflected in a marked slowdown in economic activity, to raise the warning about an economic recession, which prompted the global central banks led by the Federal Reserve to switch their monetary policy stance from tightening to easing.

In the year that was about to end, these signals grew to highlight that the global economy was subjected to great repercussions, which prompted international observers to reduce estimates of global GDP growth several times until their last vision, which recorded the lowest levels of growth.

These stalemates lie in issues that still exist, such as trade wars with political or geopolitical uncertainty as well as the position of monetary policy.

Also, tensions between the United States and China lies at the forefront of the scene, although there is truce from time to time, in addition to the uncertainty between the UK and the European Union (EU) around the Brexit.

It cannot be denied that the Brexit-related risks have cast a negative shadow on the UK and the EU this year amid the uncertainty that has hurt economic activity.

The slowdown in economic growth was not a matter restricted to specific economies, but it spread to all parts of the world with the fact that the economic downturn affected countries such as Germany, Hong Kong, and many others.

And in four consecutive statements, the International Monetary Fund (IMF) lowered estimates of global economic growth in 2019 from 3.5% to 3%, which would be the lowest pace of growth since the global financial crisis.

The weak growth was mainly due to the sharp decline in global industrial and commercial activity with high tariffs as well as the uncertainty that is undermining demand for capital goods.

Moreover, the Purchasing Manager Index (PMI) fell in many countries this year below the level of 50 points, which is the breaking point between the expansion of activity and its contraction.

The IMF also believes that the auto industry, which witnessed a decline in performance, due to a combination of factors such as the turmoil caused by new fuel emissions standards in the euro area and China, had lasting negative effects on the overall economic situation.

However, monetary policy played a major role in supporting the global economy and reducing downward risks to growth, but the extremely low-interest-rate in addition to the negative range shift meant that the central banks' decisions are lacking competence.

It is worth noting that with the fact that interest rates are at low levels, the space appears limited for policymakers to stimulate growth in light of the depletion of central bank tools.

Chief economic adviser at Allianz Mohamed Al-Arian said that Central banks are in a very weak position and cannot do more.

The developed economies continue to move towards their lowest potential in the long run, as the IMF reduced its estimates in those countries to 1.7 % in 2019 compared to 2.3 % recorded in the previous year.

These countries are able to withstand due to the strong labor market conditions and the stimulation of monetary policy, as both were able to fix weaker external demand.

As for growth within emerging markets and developing economies, it also witnessed a drop to 3.9 % in the current year, compared to 4.5 % recorded in 2018.

According to global forecasting think-tank Oxford Economics, which monitors the performance of 200 countries around the world, the global economy grew by 2.5 % in 2019, which is the weakest reading since 2009.

In a new message confirming this uncomfortable situation, the Organization for Economic Cooperation and Development (OECD) also decided to reduce its forecast for global growth since the global financial crisis at 2.9 %.

The reduction this time comes amid greater concern about the failure of governments to overcome global challenges such as climate change and the digitization of economies, in addition to the continuing high level of uncertainty.

The situation was not any better in terms of threatening global debt, as it accumulates day after day since 2008, putting pressure on the global economy.

Global debt reached $ 250.9 trillion in the first six months of 2019, reaching the $ 255 trillion barrier by the end of the year, according to International Finance Corporation (IFC) calculations.

Also, Global debt stands at 320 % of global GDP, which is exacerbating concerns about default.

according to the IMF, the debts of international organizations also portend another risk, as investors desire to achieve higher returns through risky assets in a low-interest-rate economy.

Climate change is an additional burden on the global economy, as a recent study by the Economist Intelligence Unit (The EIU) indicates that this issue may lead to a 3 % reduction in growth within the next 30 years.