Worldwide economic growth looks set to cool off, according to economists at Nomura.
“Our forecasts suggest that global growth will slow from here,” wrote a team led by Lewis Alexander in a note dated Tuesday.
They see 3.7% growth in global gross domestic product in 2019 and a 3.5% rise in 2020, down from a 3.9% expansion in 2018. For the U.S., their forecasts are for 2.4% growth in GDP in 2019 and a 1.7% rise in 2020, down from a 2.9% expansion in 2018.
Drivers for the slowdown include waning fiscal stimulus in the U.S., tighter monetary policy from the Federal Reserve and increased supply constraints in the U.S., according to the Japanese bank’s economists. But the deceleration likely won’t be that acute, they reckon.
Don’t miss: We’re about to discover what a post-sugar-high economy looks like
“We believe a sharper slowdown would require more evidence suggesting the world’s major economies have been overheating,” Alexander and his colleagues wrote. “The recent drop in oil prices CLZ8, -4.67% , the likely support to consumption that firmer wage inflation ought to yield, together with still-accommodative fiscal policy in the eurozone (as well as the U.S.) are further reasons for a relatively sanguine cyclical view.”
Check out: Oil prices tumble anew, with record skid set to continue
However, the risks to their relatively optimistic base case have risen because of political developments, they said.
“The possibility of a more grid-locked Washington following the U.S. midterm elections and the likely absence of further growth-friendly policies from the Trump administration is one new source of concern,” the economists said. “Greater uncertainty about European politics, specifically in Italy and the U.K., has more potential to undermine financial and economic stability.”
The biggest risk to the world economy comes from China and other emerging markets, which collectively contributed the lion’s share to global growth in 2017, according to Nomura’s team. China’s economy is “under considerable strain from deleveraging,” and the economists are “not optimistic for a quick end to U.S.-Sino trade frictions.”
Read: Why investors are growing increasingly anxious about China
Worries about political instability, China’s deleveraging and other factors have “soured the mood of financial markets SPX, -0.02% in recent weeks,” they added.
Want news about Europe delivered to your inbox? Subscribe to MarketWatch's free Europe Daily newsletter. Sign up here.
