Storm Next Year? Unholy Mix?
Credit Suisse does not expect a recession this year and only sees a modest chance of global recession next year.
Credit Suisse predicts that the probability of a global recession in 2020 is between 10 percent and 15 percent. Loosening monetary policy by central banks and the likelihood that the U.S. Federal Reserve will cut rates this summer have delayed the possibility of a severe economic downturn, noted John Woods, Credit Suisse’s chief investment officer for Asia-Pacific.
However, policy misstep by central banks, especially the Fed should they decide not to loosen, could trigger recessionary fears to increase as well. In its base case scenario, Woods said that there will be a temporary escalation of trade tensions, but a resolution between the world’s two biggest economies could be reached as soon as August.
Trade Dispute And Oil Prices Are Keys
Last Tuesday, U.S. President Donald Trump tweeted that he planned to have an «extended meeting» with Chinese leader Xi Jinping, at the G20 Summit in Japan next week. «If we were to see the trade dispute intensify and deteriorate, the weakness in the global industrial production cycle would clearly intensify. I think that would start to transmit some quite concerning signals around the global economy,» said Woods, who was quoted in «South China Morning Post».
Also, if oil prices were to surge due to supply issues, «that would represent something of an unholy mix of risk factors that could upset our global outlook,» Woods said.
