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Ifo Institute: Experts expect the world economy to cool down in 2019

When the ifo Institute conducts its research into world economic trends the questions that it asks well over 1,000 experts include the following two: What is your present economic situation? And what do you expect over the coming six months – will it be better or worse? Until mid-2018 the monthly response for Europe and North America was clearly positive. The economic barometer indicated “boom“. However, there has been a significant change since the beginning of 2019. Although around 58 % of those questioned reported that the situation was not too bad, expectations for six months’ time tend to be more negative.

“The world economy is cooling down”, reported the president of the ifo, Clemens Fuest, speaking today at the ITB Future Day. “It is not yet a recession, there is no contraction, but growth is expected to be significantly weaker. The boom is over.”

Fuest has identified three reasons for this development, which he also describes as presenting a threat:

  • There is the possibility of trade wars between the USA and China and between the USA and Europe, which are already worsening the atmosphere and, if allowed to escalate, could cause a great deal of damage.
  • There is also the possibility of a hard Brexit, which will impose difficulties with regard to the question of Ireland.
  • There is also Italy, whose economy has been stagnating ever since the monetary union and, since the most recent elections there, with an idealistic fiscal policy that also includes a return to the lira.

“All of these factors together are creating political uncertainty. As a consequence companies in every sector are reluctant to invest”, concluded Fuest. Furthermore financing is denied if there do not appear to be any plans to repay the credit.

The economics professor cannot offer a simple solution, and anyway this would not be a serious approach. However, one thing is certain: this uncertainty will also impact the travel and tourism sector.  

Isabel Bommer

 

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