Global Economy Performance

In its January 2020 report, World Bank believes that the global economy will improve in the current year contrary to a more pessimistic view that prevailed during the past year. After the lowest average rate in the past four years, the last of which was around 2.4% for 2019, it is believed that the global economy will achieve growth by about 2.5% in 2020. This less pessimistic outlook appears to be consistent with the visions of the US Federal Reserve which on December 11, 2019, stopped continuing its expansionary monetary policy when it kept the base rate steady at 1.75%. Its last reduction was a quarter percentage point in October 30th meeting after a similar reduction on July 31st and September 18th, 2019.

Despite some decline in pessimism level, World Bank still acknowledges that there are high risks that may fully reverse the growth direction if they are achieved including the return to fueling the trade war and the relapse in the performance of major economies by more than expected, or facing financial problems – high loans – in emerging and developing economies by US$ 253 trillion as of the end of last September, according to the Institute of International Finance. The report states that growth in debt has gone through four waves of rising during the past fifty years. The first three of which ended in financial crises and the last one that started in 2010 is the largest and most widespread. It is not ruled out to end with a crisis unless it is dealt with prudent monetary and financial policies.

The global economic growth will not be balanced in 2020; advanced economies will continue to lose their growth rates and their expected growth rate will not exceed 1.8% for the United States of America and will not exceed 1% for the Euro Zone. But some major emerging and developing economies will compensate for that loss. The expected growth of emerging and developing economies is estimated to rise from 3.5% in 2019 to 4.1% in 2020 despite the report’s expectation that Chinese economic growth will for the first time break the 6% barrier downward to 5.9% for the current year.

In the Middle East region, the report presents three different estimates of growth for the potential growth of three major economies. While it estimates weak expectations for the Iranian economy or potential growth in the range of zero, 1% and 1% for the years 2020-2022, it expects comfortable growth rates of 5.9%, 6% and 6% for the three years for Egypt. Its forecasts are in the middle for the Saudi economy at 1.9%, 2.2% and 2.4% for the three years in a row. He expects positive but weak growth rates for Kuwait economy. After growing by 0.4% in 2019, the report predicts that it will reach 2.2%, 2% and 2% for the next three years, respectively.

The importance of the report lies in the fact that it is issued at a time when expectations vary greatly. There are those who expect a 2008 Crisis repetition and perhaps a great depression similar to what happened in 1929 but the report’s expectations are better than those who believe a lighter scenario, i.e. small and short-term negative growth, i.e. recession, It adopts the weak positive growth scenario and acknowledges the existence of risks.