Political instability in West will overshadow global GDP growth

Source:Global Times Published: 2019/12/15 23:33:40

Police stand guard during the strike in Paris, France. (Photo by Aurelien Morissard/Xinhua)

Various unstable political factors in the West will decide whether or not there will be a slowdown in the global economy next year.

The 2020 US presidential election hinges on the economy. US President Donald Trump is now in a critical period for his reelection campaign. He needs a string of good economic news to win support for another term. There is a strong motivation to push up economic growth in the short term through stimulus policies, although those policies may weaken the US economy's long-term growth potential in some ways.

As we head into the 2020 presidential election, a tough test for the Trump administration will be US relations with China. Waves of nationalist sentiment may reshape Washington's policy on China as presidential candidates strive for the broadest public support. Nationalist sentiment may create downturn pressure in the US economy. 

The downward pressure and the upward momentum created by possible stimulus policies will interact with each other. For financial markets and the US economy, it will be a time of heightened uncertainty.

China and the US have agreed on the text of a phase one trade deal. China-US trade talks have achieved periodic achievements and there are indications that both sides are moving in the right direction. However, there is still much work to be done. 

Some people may advise Washington to postpone signing the phase one trade deal. Even though the deal can be signed this year, the next round of negotiations between China and the US won't be easy. The shadow of the trade war over the global economy has not been completely eliminated.

In addition, Brexit, mass strikes in France and criticism of Chancellor Angela Merkel in Germany may become also problems for the European economy. Political instability is likely to cast a shadow of uncertainty over the economy in Europe next year.

One of the biggest hurdles that will constrain the world economy next year is politics in the West. A global recession is unlikely in 2020, but growth may remain lackluster. Only if the US, UK, France, Germany and other Western countries focus on solving their political problems and shoring up their GDP growth, can the global economy have a bright future in 2020.

Posted in: GT VOICE

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