Barclays says global recession risk 'limited', sees pick up in South America

The global economy is set to slow a tad in 2019, economists at Barclays said, but the risk of a slump into recession is limited.

In its latest Global Outlook, the investment bank forecast the rate of growth in world GDP would slip from the 3.9% clip observed over the course of 2017 and 2018 to 3.6%.

However, the first quarter would mark the bottom, it said, thanks to policy stimulus in the People's Republic of China, fading one-off effects Stateside (such as the US government shutdown), a modest fiscal easing in Europe and "constructive outcomes" on US-China trade and on Brexit.

Meanwhile, and led by the Federal Reserve, the world's central banks had shifted from normalising policy back to reflation.

"They are unlikely to reverse course again anytime soon, given below-target inflation (ECB, BoJ) and a seemingly higher tolerance for modest overshoots (Fed)," Barclays added.

For Barclays, the weakness in Europe was in large part a function of how open and manufacturing oriented its economy.

On top of that, the Continent was buffeted by headwinds originating from multiple sources, including Italy, Brexit and the 'yellow vest' protests in France.

As ever (but only until the fourth quarter), the US was more isolated "but ultimately could not escape the global collapse of manufacturing sentiment, to which financial markets reacted sharply towards year-end, sending equity valuations and inflation expectations lower."

Some of the rebound in global growth it was expecting to materialise in the second quarter of 2019 might however soften in the back half of the year as growth in the US reverts to trend, the investment bank said.

Growth was set to slow in all regions save South America, with that region set to benefit from better outlook for Argentina and Brazil.

In the US, growth would slow to 2.7%, in the euro area to 1.3% and in China to 6.2%, but in all cases rates of expansion would remain above or around trade.