‘There is a tendency for institutions that missed the warning signs before the last financial crisis to over-cook their doomsayer’s warnings as they consider the potential for another one.
The International Monetary Fund leads a group of gloomy forecasters that worry about the stability of the global economy amid rising debt levels and slowing GDP growth.
How long they ask – can the expansion seen since the last crash go on before another recession hits?
And if a global recession is pushed further into the future by even larger dollops of borrowed money from the financial system – will the next recession quickly become a crash of similar or even larger proportions than the one seen in 2008?
Some analysts argue that such gloomy warnings ignore the precedent seen in recent years that major economies tend to start the year slowly before getting into gear later on.
That was especially true in 2016 when most of the developed world saw only a small lift in GDP in the first quarter before growth took off.
However, the three years from 2014 were characterised by falling oil and commodity prices – which moderated inflation.
This gave the global economy a boost it desperately needed albeit at the expense of oil- and commodity-exporting nations – and the environment.
The boost faded in 2017 and left 2018 as a particularly unspectacular year – except in the US where Donald Trump’s tax cuts more than made up for lacklustre global trade and fed a consumption boom.
As 2019 gets under way – things look very different.