The new mediocre: the world economy


Hello. And welcome to the intelligence on a communist radio. I'm your host. Jason Palmer every weekday. We provide a fresh perspective on the events shaping your world. In the Suhel vast swath of land that stretches across the African continent. There's a worrying trend jihadists of several stripes growing in number and in influence, we tag along with an international training exercise aimed at preparing African forces contained a threat. And you might think that the public's interest in the world's changing climate has been on a steady rise you'd be wrong, a dive into data about online searches reveals that climate concern comes and goes. First up though. Over the past six months, a pessimistic picture of the world economy has been emerging speaking at the US chamber of commerce last week Christine Lagarde, the head of the International Monetary Fund issued a warning the global economy is at a delicate moment. Only two years ago. Seventy five percent of the global economy experienced an upswing. So it was a synchronized growth acceleration for this year. We expect not seventy five but seventy percent of the global economy to experience a slowdown in growth. Exactly the opposite of what we had. The IMF later today. We'll be publishing its forecast for the year. Simon Cox are emerging markets editor based in Hong Kong. We already know little bit about it from a speech Christine Lagarde gave she pointed out that they'll be cutting their forecast. They had expected back in January world economy to grow by about three and a half percent sheer. So it sounds like they're going to shave some off that forecast. However, she did emphasize the left is not expect a recession this year. So it's a slow down and one that should autumn out by about mid year in nephew. And why are we seeing this Loda? So the slowdowns quite broadly based the guard pointed out that a variety of countries have slowed down from last year. China has been trying to slow the growth of credit for some time. Now, there's also been of course, this trade will trade tensions between China in America have damaged sentiment. More broadly earlier in two thousand eighteen we saw the Federal Reserve raising interest rates which caused a of problems for variety of emerging economies and euro-zone to seems. Perennially weak takes very little seems to slow its momentum. So order these things happening together have added up to a slight gloomier outlook the me had props year ago, and is any one of those factors dominant in this lowdown. So the trade war has attracted most of the headlines. I think the feds raising interest rates and China's efforts to curb leverage, probably more important. Although it has to be said the trade war has inflicted greater damage on sentiment than I would have expected. It's not so much the practical concrete effect of the tariffs. It's more this notion that two of the world's biggest economists consi I and no longer working in concert to try and keep the economy going and with this downturn than in prospect, what can policymakers around the world due to to get ready to make his already taken some measures. And most importantly, the fed has signaled that it won't be raising interest rates again anytime soon, I think that pose an interest rates has been quite bawdy welcomed by financial markets. And I think it came just. In time a little bit too late. And also China has also turned attention away from curbing leverage towards shoring up growth, and in the past China's been quite effective in reviving demand when it decides to so those both measures that policymakers have already taken and then looking more broadly with always very much welcome Germany's splurging bit. Why would that be such a singularly helpful factor to mini vans, quite tight public finances? It's obviously the biggest economy in the zone surrounded by much weaker economies that would benefit greatly from the spillovers of higher German spending. So the one Konami that's really in a position to spend more refuses to and that leaves its neighbors who aren't really in a position to spend more having to do so to try and up to mind in their own conham is so euro-zone as a whole exports demand weakness to the rest of the world when it really should be pulling its weight. So you mentioned one of the big factors here is fed sort of pausing in its rate increases is their case for a cut. I think possibly one of the perennial worries about this recovery is the central banks have not yet been able to quote, unquote, normalize monetary policy that they haven't been able to raise interest rates to what historically would have been more normal levels that matters in particular if there's a downturn because impasse recessions central banks had to cut interest rates really quite severely in order to offset recessionary impulses. And they sent me don't have room to do that anymore. Now the best insurance policy against having to cut heavily is to cut a little early. And so there's perhaps a case for the fed to cut even if that results in a little bit too easy. The damage that would do is very little in comparison with the damage of cutting too late that is US might of heat a little bit might have a little bit above target inflation something that really would concern. Nobody very much at all. So there is perhaps a case for the fed to be preemptive. The only nuance is that if the fed now did that would be seen as a bit of a sign of panic. Because they seem to be while the set against doing that absolutely have to so in the the worry with growth forecast that look like this one will is that we're headed for kind of another global recession. How do you see things playing out this time give us give us cause for optimism? So there are few signs that quote has bottomed out actually undulated number from China wasn't too bad German industrial production was okay, the US labor market still looks reasonably robust, although earnings growth has been a bit disappointing. So we have a number of lax from the data just getting numbers for March. Now, the lag in the processes, right? So it'll of prepared this report using data that might now be several weeks old, and as Christina guide said in speech, economic weather is very unsettled. It's changeable, and so it's possible. That's hope that the slowdown has already finished and seeing the first signs of stabilization, perhaps even a modest uptick in growth. So as as you say things are unsettled if things are. Actually on the up, and perhaps we haven't you know, crunched the numbers yet for how much it's on the up what might threaten that other whole variety thinks that could still destabilise growth, we've never really been able to get back to a fully healthy economy that's growing at its full potential without a lot of help from monetary policy. So you can think of I don't know the disruption from Brexit would obviously be obvious danger signed seven Newell of trade tensions. It's remarkable. How Optimus dick snatcher markets are about to deal between China and Trump, and yet we've been hearing that as a deal imminent for quite long while now without it actually happening. So there are a number of risks years ago. Christine Lagarde actually coined this phrase, the new mediocre, it was her take on the more common phrase, the new normal and her point was that you global growth was not as often as it had been Patou still pretty disappointing by historical standards, looking back over ten or twenty years. And I think that's where we're at. You know, the good is never that. Good. Hopefully, the bad won't be awful. Really stuck in this new mediocre right somewhere between cautious optimism and get used to it. That's right. Simon. Thanks very much for your time. It's It's my. my pleasure.

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