Pimco forudser moderat vækst i 2020

As a consequence, we are now more confident in our baseline forecast that the current window of weakness for global growth will give way to a moderate recovery during 2020. World GDP growth, which has been slowing over the past two years, has yet to bottom. However, PIMCO’s World Financial Conditions Index, which tends to lead output growth, has been easing (rising) in recent months, pointing to a moderate cyclical growth recovery in the course of this year (see Figure 1).

The Fed and other major central banks have helped to extend the global expansion by adding stimulus in response to rising recession risks. However, last year’s easing of monetary policy comes at a price: Whenever the next economic downturn or major risk market drawdown hits, policymakers will have even less policy capacity to maneuver, thus limiting their ability to fight future recessionary forces. Thus, while “time to recession” has likely increased with last year’s monetary easing, so has “loss given recession.”

An inevitable consequence of cutting rates further toward the effective lower bound is that there is now less monetary policy space available for future action.

A common response to the above is that while monetary policy has less space, fiscal policy can and should step in and save the day whenever the next recession looms. In theory, we agree and have in fact argued for some time that fiscal policy is likely to become more proactive in the future. In practice, however, it is unlikely that governments and parliaments are able to diagnose recession risks early enough and, even if so, implement fiscal easing in time to prevent a recession, given the slow way in which political processes usually work. Thus, central banks will still have to be the first responders in the next crisis and, again, will be more constrained than they have been in the past.