Topline: Amid a global slowdown in economic growth that has seen central banks lower interest rates near zero or below in an effort to provide stimulus, here’s a look at which of the major economies are on high recession alert.
- Hong Kong, following five months of citizen protests that have battered the city’s economy, has entered into a “technical recession,” with industries like tourism and retail getting especially hard hit from the ongoing turmoil.
- The UK, with its ongoing uncertainty over leaving the European Union (and still no end in sight) has watched its economy recently shrink for the first time since 2012, and a no-deal Brexit could well slide it into a recession.
- Germany, the EU’s biggest economy, is set to slide into a recession thanks to a continued decline in its manufacturing sector as well as lackluster global auto sales.
- Italy, the EU’s fourth-largest economy, was in a technical recession for the second half of 2018 and has faced continued economic woes from weak productivity, high unemployment, huge debt and political turmoil.
- China’s economic growth has continued to slow amid the trade war, too: The IMF forecast only 5.8% growth for the world’s second-largest economy in 2020, down from 6.6% in 2018 and 6.1% forecast in 2019.
- Other highly-stressed economies around the world include Turkey, Argentina, Iran, Mexico and Brazil, to name a few.
Crucial statistic: The world economy will only grow 3% this year, according to IMF estimates—that’s the slowest rate of expansion since the global financial crisis started in 2008.
Tangent: With central banks around the world trying to keep interest rates low, more people in rich nations like Europe, Japan and the U.S. are hoarding cash—but that trend is a mirror image in emerging economies like Russia, China and India, where cash as a percentage of GDP is depreciating.
Key background: The U.S. stock market, on the other hand, just hit another milestone, as the S&P 500 set a new record high on Monday. U.S. economic data has held steady by some metrics, though signs of a slowdown are starting to emerge: Manufacturing is contracting and inflation remains fairly low, even as consumer spending and employment levels stay strong. Trade uncertainty has continued to cause market volatility, while Wall Street is increasingly watching the Fed for added stimulus to prop up slowing growth and reduce pressure on the yield curve, which has been inverted since May—yet another recession indicator. In spite of the bull market’s years-long expansion, the global economic slowdown has continued to set off multiple rounds of fluctuating predictions that the U.S. will inevitably fall into a recession—with current odds for a downturn in 2020 at 27%, according to Bloomberg Economics.