Is the world on the brink of a major economic crisis? | Economy

In recent months, signs of concern for the global economy have increased: badysts point to increasing risks of crisis on the horizon and international organizations have reduced their projections of global growth.

"We consider that the recent slowdown in growth is part of the cycle Many regions of the world, including the United States and Europe, have grown faster than their long-term trend, "Johnson told BBC News Brazil.

She points out that in the United States the benefits of tax cuts end of 2017 continue to fuel the growth and expansion of the US economy is one of the reasons factors that prevent a global recession in the short term.

"But, of course, any expansion ends one day."

US slowdown

The world's largest economy reports its second-longest cycle of continued expansion, initiated in June 2009, but badysts point to risks badociated with rising rates of inflation. interest, trade tensions, especially with China, turbulence in the financial markets and the economic impact of the partial shutdown of the federal government on the economy.

The reduction of the tax helped revive the US economy in 2018 with a decline of 2.9%. s the impact of the measure tends to weaken gradually. The IMF forecasts an increase of 2.5% in 2019 and 1.8% the following year, a forecast unchanged since October.

The Federal Reserve raised the central interest rate four times last year, the last in December by 0.25 percentage points to 2.25% to 2.50%. High interest rates help control inflation, but this affects the growth of the economy by encouraging savings and reducing consumption and investment in production.

President Donald Trump blamed recent rises for harming the country's economy, which has led to the undue influence of the US leader, thus threatening the independence of the Fed, which falls under Congressional responsibility for monetary policy.

On the 30th, the Fed decided to maintain the current interest level and indicated that it did not anticipate any further increase. US inflation remains close to the 2% target a year and the labor market, another indicator of economic health, remains solid with 2.6 million jobs created in 2018 and a rate unemployment rate of 3.9%.

"One way to interpret (the option of two increases) is that they are worried about raising interest rates too much and causing a recession," economist Kathryn Dominguez, a professor of economics and public policy at the university. from Michigan and a researcher at the National Bureau of Economic Research.

Analysts also point to trade tensions between the United States and China, which affect the rest of the world, and have already led to a downward revision of the IMF's earlier projections for the global economy in October.

If the two countries do not resolve the dispute, tariffs already imposed by the United States on a range of Chinese products could rise from 10% to 25%, causing further retaliation by China. In addition to fighting with China, the US government is also facing tensions with several other trading partners, imposing tariffs on imports of steel and aluminum.

China gives warning signals

The performance of the Chinese economy is also worrying. In January, China announced a 6.6% growth in 2018, its lowest rate since 1990. IMF forecasts are expected to decline further by 6.2% this year and into 2020.

"J & # 39 China is continuing to grow at a steady pace this year, with problems such as high debt, overcapacity in some heavy industries and real estate markets, "said Johnson.

"It is clear that the industrial sector is currently facing difficulties."

The Chinese government is planning stimulus measures, including tax cuts and investments in infrastructure. "It will be crucial," said Dominguez.

"China is at the root of much of the (international organizations') decision to reduce global growth projections, which is an important part of global growth."

The European economy is also facing risks that could affect the world economy, with the difficulties of accepting to leave the United Kingdom of the European Union (the "Brexit") and the slowdown of the euro zone whose growth has been revised this year by the Commission. IMF at 1.6%, down 0.3 percentage point from the October projection.

Germany is still adapting to the new pollutant emission rules for automobiles that have affected this industry. France has been raging in street protests for more than two months. And in Italy, "concerns about sovereign and financial risks have had an impact on domestic demand," the IMF said.

The problems in the United States, China and Europe often affect emerging markets, such as Brazil, but Dominguez believes that it is too early to calculate the possible impact of the future. a more pronounced slowdown.

In the case of Brazil, Johnson notes that it is important to see what is happening with reforms, such as social security.

The IMF forecasts a 2.5% growth of the Brazilian economy this year, 0.1 point higher than the October forecast and a rate similar to that of 2.53% of the Focus report of the Central Bank, based on research. with consultants and financial institutions. In 2020, the IMF forecast is 2.2%, down from 2.6% of the Focus.

Analysts also cite other concerns for the global economy, such as the high level of global debt and the more polarized politics of several countries. But Dominguez said cuts in global growth prospects by major international organizations were still modest.