Global economy remains in a relatively moderate cyclical slowdown, but concerns about a recession in the US and Europe have not yet materialized, and short-term macroeconomic indicators are increasingly showing signs of stabilization. Manufacturing sentiment in the US, euro area, China and other major economies is no longer declining, new industrial orders have stabilized, suggesting more positive dynamics in world trade in the first half of 2020, and OECD leading economic indicators index has begun improving for the first time since 2018. However rebound in economic indicators is rather unconvincing, short-term economic indicators are at relatively low levels and the risks of recession in the global economy remain.
The main reason for cautious optimism about the global economy at the moment is the strong service sector and consumer sentiment, as well as the positive dynamics in the labour market, which until now has not been affected by the slowdown in global manufacturing. Of course labour market and consumer sentiment are lagging indicators in the economic cycle, but the China-US Trade Agreement, as well as interest rate cuts and other stimulus measures by major global central banks in 2019, will give a boost to the global economy and which have already lifted financial markets. At the same time, however, the weak point in the global economy in 2020 could turn out to be fiscal policy, as it is expected to be less expansionary in large economies than in 2019.
As a result, the threat of a recession in the US and Europe remains elevated, but nonetheless economic analysts expect a slight acceleration in the global economic growth from 3% in 2019 to 3.1% this year. By comparison, the global economy grew by 3.6% to 3.8% annually between 2016 and 2018. Of the Baltic's major export markets, a slight improvement in growth rates is expected in Germany and Russia, but in Scandinavia the growth rates could become even slower in 2020. Thus, the negative impact from the external environment in the Baltic States will persist also in 2020, but it will be smaller than in 2019.