2020 is the Year of 'Slowbalization'... Global Growth Rate 3.2%

The Decline of Globalization Continues with Minimal Growth Expected
US Anticipated to Produce About Half of OPEC's Crude Oil Output

[Asia Economy Reporter Kim Eunbyeol] This year, the global economy is expected to enter an era of 'Slobalization,' signifying the decline of globalization. This outlook stems from ongoing tensions caused by the trade war between the United States and China, which is anticipated to lead to a contraction of global supply chains.

On the 8th (local time), PricewaterhouseCoopers Consulting (PwC) in the UK forecasted that the global economic growth rate this year will be 3.2%. Considering that the long-term average growth rate in the 21st century is 3.8%, this figure falls significantly below the average. PwC calculates economic growth rates based on Purchasing Power Parity (PPP).

In particular, the US economy, which had been the sole driver of growth worldwide until last year, is expected to show signs of slowing down this year. PwC projected the US growth rate at 1.8%, whereas Germany’s economic growth rate is expected to rise by 0.3 percentage points from last year to 0.9%. It explained that Germany’s economy tends to rely more on household consumption rather than exports or investment.

For South Korea, last year’s growth rate was 1.9%, falling below 2%, but it is expected to rise to 2.1% this year. As many institutions predict, China’s economic growth rate is expected to break below the 6% range.

Barrett Cappellian, PwC’s Chief Economist, stated, "Globalization has been the defining term for the world economy since the 1970s, but recently, goods trade has been sharply declining." He added, "The World Trade Organization (WTO), which played a role in mediating global trade disputes, is also losing influence, so trade flows are expected to shrink further this year." Considering that trade flows tend to move in tandem with economic growth rates, this implies that overall economic growth will inevitably weaken this year. PwC emphasized, "We must remember that Slobalization means that trade volume and (economic) growth continue but at a very minimal level."

Worldwide job creation is expected to increase. PwC estimated that 2 million jobs will be created this year across the Group of Seven (G7) countries. However, about 80% of these jobs will be generated in the United States, the United Kingdom, and Japan. While the G7 labor supply will gradually increase and wages will rise, if companies do not improve productivity, profits are expected to shrink.

Despite concerns about a sharp rise in oil prices due to tensions between the US and Iran, PwC expects US oil production this year to reach half that of the Organization of the Petroleum Exporting Countries (OPEC). With increased supply of US oil, changes are anticipated in the oil market led by Middle Eastern countries. This also explains why oil prices have not risen significantly despite recent Middle East crises. US daily crude oil production is projected to reach 13 million bpd (barrels per day) this year, more than double the level from ten years ago.