Complex Made Simple

Opinion: 2020’s clock is ticking, and a recession is nigh

If our economy was a boxer, it'd be long out for the count. Global data is leaning towards an impending global recession, as we hold breath for a heroic comeback.

Today, public enemy number one has to be the Coronavirus outbreak, which has stunted Chinese growth and in turn impacted the global economy Other than the outbreak, the rest of the economy's woes are man-made: Trade wars, economic inequality and ill-advised policies The world across, save for perhaps one region, is seeing a downturn in economic prospects

If the world economy was an outmatched and wounded boxer, wobbling and dazed, you’d be scrambling to guess how many more hits they’d be able to take before they were down for the count. Bizarre as it may sound, that is the international situation today. 

What a better way to start the year than with the hashtag #WW3 trending on social media as the US butts heads with Iran and kills one of the their top generals. Some good news abounds for them, however: Unemployment in the US has dropped, and the stock market has seen a boom in investment, but manufacturing has taken a hit and the yield curve has take a turn for the worse, inverting. Meanwhile, POTUS is still on a tear, handing out tariffs like they were Halloween candy (though he has eased on China for now after a months-long tit-for-tat trade war with the Asian superpower). 

In fact, China could use the break. Not only is it dealing with exorbitant taxes by Trump’s administration on its exports, it is also struggling with a novel coronavirus outbreak (Covid-19) that has crippled its economy and caused the deaths of over 1,000 people, with confirmed cases popping up worldwide. Over half of its businesses have been shutdown, businesses that accounted for more than 80% of national GDP and 90% of exports. It’s safe to say that what happens in China affects the entire world, what with them making everything and the kitchen sink. These after effects are already rearing their ugly heads, as global supply chains, tourism and more suffer.

Read: The capital markets’ Phenomenon of the Year has its name: Covid-19

In the land of the rising sun, the Japanese continue to fret over dwindling birth rates and fallout from the stunted Chinese economy. Figures showed that Japan’s economy, the world’s third largest, slumped by an annual rate of 6.3% during the last quarter of 2019. Remember that millions in China are under home quarantine, with drones and other Orwellian traditions up and about enforcing order. 

In the Middle East, it’s business as usual as sociopolitical unrest continues to sweep through countries like Iraq, Lebanon and Syria, with no end in sight. The GCC seems to be the only region in the vicinity that’s enjoying what can be only considered as prosperity, with ambitious plans and projects well underway like Saudi’s Vision 2030 and the UAE’s Expo 2020. Unemployment rates among nationals are still high, but the situation is being addressed through nationalization schemes. Other than that, you can’t really go wrong with oil wealth, which is the ultimate buffer.

To the Northwest, the UK has finally said its goodbyes to its European brethren, and heads into the great unknown all by itself – not an exciting prospect for the Pound Sterling, mind you, but many Brits seem confident. House prices have been rising after all, as reports state

Read: The UK’s post-Brexit economy – now what?

A week or so before, European leaders at Davos were addressing the bigger concern on everyone’s minds (at least we hope it is) – climate change, which continues to heat up our planet into a barren land, destined to cause everything from food shortages to land loss and much worse. There is an unmissable opportunity for an allegory here when you have a 17-year old Gen Z’er like Greta Thunberg have her global warnings shot down by baby boomers like US President Trump and US Secretary of the Treasury Steven Mnuchin – the perfect depiction of the conflicting climate change rhetorics that could make or break our planet’s future. 

In the meantime, however, and just like Asia, European countries are feeling the burn from something other than global warming: the Covid-19. The central bank of Germany, Europe’s largest economy, said that the country’s major industrial sectors – from cars to chemicals – were continuing to see a fall in orders “albeit with a decrease in intensity”. In Italy, a mix of internal conflict as well as external influences like the US-China trade war have brought down GDP growth in recent quarters and officially sunk the country into recession territory. Greece’s debt crisis continues, as do France’s gilets jaunes protests amid economic inequality. 

Countries like South Africa are seeing some economic downturn as well, with the the World Bank cutting South Africa’s growth forecast for 2019 through to 2021, citing weak investor sentiment and lingering policy uncertainty.