Talking Point  

Schroders predicts a slowdown rather than recession

Schroders predicts a slowdown rather than recession

Schroders has changed its global economic outlook to a 'slowdown' but not a recession.

In a statement released on Friday (March 15) by the Schroders Economics team, the investment house stated that it has cut its global GDP growth forecast again for 2019 but has revised up its prediction for 2020 amid greater optimism on the longer-term outlook. 

Keith Wade, chief economist at Schroders, said: "We have revised down our forecast for global GDP growth in 2019 to 2.8 per cent from 2.9 per cent, but increased our projection for 2020 to 2.7 per cent from 2.5 per cent.

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"The downgrade for this year - the fourth in consecutive quarters - is driven by cuts to our forecasts for the eurozone, UK and Japan, which offset a small increase to our China forecast."

In 2020, the upward revision is across the board with, for example, the US upgraded to 1.6 per cent, previously 1.3 per cent, Japan to 0.4 per cent, previously 0 per cent, and China nudged up to 6.1 per cent from 6 per cent.

Meanwhile, Schroder's s inflation forecasts have been reduced for this year and next with reductions across all regions except Europe.

US inflation is also lower as a result of a smaller rise in core inflation - excluding food and energy prices- which it expects to peak at a lower level before declining in 2020.

Commenting on what impact this will have on investors, Martin Bamford, chartered financial planner and managing director at Surrey-based Informed Choice, said: "Investor confidence is influenced to some extent by the health of the global economy.

"When there is a gloomy outlook, clients are more reluctant to invest and it takes more work to convince them to hold tight of the long-term.

"Increasingly, our clients are paying less notice to economic forecasts, which tend to be proven wrong more than they come true. We are long overdue a global recession, after a sustained period of global economic growth, but the exact timing of this is anyone's guess."