Global economic gloom beckons


It has been said many times that one should not be guided by fear. That fear is a bad counsellor. But is that really so?

It has been said many times that one should not be guided by fear. That fear is a bad counsellor. But is that really so?

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Everyone has their own fears.

In my opinion anxiety can be a good counsellor. Fear prevents one from showing reckless behaviour.

So far, fear has saved your life to a large extent. Ask people with a high-risk profession if they are ever scared. They will nod in the affirmative. Fear is part of it. And our fears give us so much information about who we really are.

Fears of recession

A month ago, CNN Business reported that US business leaders are growing more worried that the country will enter a recession by the end of 2020. Their primary fear was US protectionist trade policy. That is the top-line finding of a report released by the National Association for Business Economics. The survey, based on responses by 53 economists, is a leading barometer of where the US business community thinks the economy is headed.

“Increased trade protectionism is considered the primary downside risk to growth by a majority of the respondents,” Gregory Daco, chief US economist for Oxford Economics, said in a statement. The report found what it called a “surge” in recession fears among the economists.

The report comes as the US ratchets up its trade war with China and has gone after other major trading partners, including Mexico and India.

The risk of recession happening soon remains low but will “rise rapidly” next year. The survey’s respondents said the risk of recession starting in 2019 is only 15 percent but 60 percent by the end of 2020. About a third of respondents forecast a recession will begin halfway through next year.

According to the survey, the median forecast for gross domestic product growth in the last quarter of 2020 was 1.9 percent. That would be a big drop from the most recent estimate of current US economic growth — 3.1 percent in the first three months of 2019. The US is probably somewhere in the last stages of an epic run of economic growth that began in 2009.

Moderating spending

Dramatic and coordinated responses by the Federal Reserve, Congress and the Obama administration helped pull the country up from the Great Recession.

Tariffs on Mexico will hurt United States business.

President Donald Trump, who took the reins of the US economy from Barack Obama in 2017, has aggressively tried to reorder the US position on global trade. He has picked prominent fights with China and Europe and has threatened tariffs on Mexico over illegal immigration and India over access to its markets.

Other notable findings from the National Association for Business Economics include 56 percent of the respondents who cited increasingly protectionist trade policy as the greatest risk to the US economy in 2019. Separately, 88 percent pointed to US trade policy, and retaliation by other nations, for why they lowered their GDP growth forecasts.

Some 14 percent believe there could be a “substantial” decline in the stock market, and 10 percent feel a slowdown in global growth, are the biggest risks to the US economy. Business spending will moderate this year and next year after witnessing a strong 6.9 percent growth in 2018.

Seeing all this, I can say from experience that a warned person counts for two and by letting your fear guide you, the best result can be extracted from it.

Benjamin is a business consultant based in China

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