The Phase 1 trade deal signed by the US and China in January 2020 has created a temporary but unstable equilibrium. The deal could still collapse and a re-acceleration of trade tensions in 2020 remains our base scenario.
After years of outperforming its emerging market peers the Indian economy has been running out of steam. We estimate India’s annual average economic potential at 5% to 6% and a significant boost in human and innovation is necessary to lift growth.
We estimate India’s annual average economic potential at between 5% and 6% over the course of the decade. Investment in human capital and innovation are necessary to foster Indian future economic growth.
Economic Quarterly Report Dutch version
We expect the global economy in 2020 and 2021 to show the slowest rate of growth since the financial crisis. This is mainly because the global economy is reaching the limits of its output capacity and industrial activity and world trade are weakening further.
Since 2017 the US has blocked the appointment of new members of WTO’s Appellate Body, which per 11 December is unable to fulfil its tasks. Consequently, trade disputes would again have to be resolved according to the GATT regime, means trade rules will be dictated by the most powerful countries.
China’s lower economic growth together with smaller and more targeted stimulus compared to previous episodes dampen the global outlook. Together with a potential shift in global policy responses, this likely means a new shift lower in bond yields again soon.
In our Where Will They Go index (including market size), India tops the list of countries that might benefit from the US-China trade war. The current economic slump weighs on India’s attractiveness as investment destination, which required the government to act by launching structural reforms.
Economic Comment Dutch version
Most recent monthly figures confirm our view of a continuous slowdown of economic growth. More stimulus is on the cards, but this will be less massive and more targeted than during previous episodes. The trade war developments can be characterized by ‘one step forward, two steps back’.
President Trump riep Amerikaanse bedrijven op om "op zoek te gaan naar een alternatief voor China". Maar het is naïef om te denken dat Amerikaanse bedrijven in China terug naar ‘huis’ komen, schrijft Rabo-econoom Raphie Hayat.
De directe handels- en investeringsrelatie van Nederland met Hongkong lijkt op het eerste gezicht beperkt. Maar er zijn ook diverse indirecte effecten die we in ogenschouw moeten nemen, zoals de rol die verdere escalatie kan spelen bij het brede conflict tussen de Verenigde Staten en China.
Special Dutch version
This report shows that the US is more exposed to disruptions to bilateral intermediate trade flows than China. In addition, also exporters and consumers in third countries such as the Netherlands feel the pinch from a disruption in supply chains between China and the US.
The recent HKIA occupation has already hit Hong Kong’s economy and its global reputation; any repeat would be exponentially more damaging. Yet if such action were to trigger a crackdown from China the potential risks would be far larger than just to Hong Kong’s GDP or its reputation.