The global economy faces a weaker long-term trend as the world’s developed markets are set to slow in the next couple of years, Moody’s Investors Service says.
“As the global economy continues to slow toward a lower long-term trend, business sentiment across major economies has become downbeat amid elevated trade policy uncertainty,” the rating agency said in a new report.
Moody’s said it doesn’t expect global recession in the next two years. “However, the current economic environment is characterized by structurally low growth, low inflation and limited policy space, making the global economy more vulnerable to negative developments,” the report stated.
The rating agency projected that GDP growth for the world’s “advanced” markets will come in at 1.6% for 2019, down from 1.9% last year. It said it sees growth slowing further to 1.4% next year, before edging back to 1.6% in 2021.
“Stagnant productivity gains and adverse demographic trends in many countries are holding back growth potential,” the report said.
For Canada, Moody’s said it expects 1.5% growth this year, down from 1.9% in 2018. The domestic economy is expected to tick up slightly to 1.6% in 2020 and 1.7% in 2021.
For the G20 economies overall, Moody’s predicted annual growth of 2.6% in 2020, flat from 2019.
The G20 will pick up slightly in 2021 to 2.8%, “but will remain below the average level over the past few decades,” the report said.
The top risk to the outlook is the escalation of trade disputes, Moody’s said.
“Although a partial trade agreement between the U.S. and China would signify progress in reducing tensions, it would not in our view substantially reduce the prevalent trade uncertainty that is weighing on business decisions,” the report stated.