Slowdown requires higher concern

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Captivated by the recent years of unprecedented global GDP growth, we all hoped – in our typical naivety – that it would last forever. Reality eventually bit and we again realized that there is no way to evade the basic economic foundation of cyclicity. It is important to say this out loud: we have now entered a time of noticeable global economic slowdown. Fortunately, it does not bear the signs of a crisis, but it does require our higher concern and the adjustment of our business understanding, thinking, and planning.

On the one hand, we are witnessing a synchronized global slowdown, driven by China and followed by all the key economies, i.e. the US and the Eurozone. The world economy has entered a low-growth phase, recording its weakest levels since the last financial crisis. GDP has slowed from 3.6% last year to 2.9% this year, before hitting a predicted 3% in 2020. Europe is experiencing a severe downturn affected by the transition of China, a country moving from an investment-led to a consumption-driven economy. On top of this high uncertainty, lasting political factors continue to weigh upon investments, singling out the UK as the most impacted. Inflation is falling, which – when coupled with low GDP growth – has led the ECB to reinstate the asset purchase programme and slightly decrease deposit rates, all in an effort to wake the real economy up. The current policy mix relies highly on monetary policy actions, with the fiscal side being left behind, especially in respect to public investments needing more drive by governments. Interestingly, with all the above being said, economic conditions across the G4 countries have not been better for a long time. For example, consumption per capita continues to rise (with the exception of the UK), wages are increasing, and unemployment remains at a record low (Poland included). Despite the macro tensions, overall economic and consumption conditions remain optimistic, so how could this translate into a slow-down? The global economy is stuck in low growth territory; hence – from a business perspective – it would be useful to name the key factors that are impacting the lowered growth environment: