Our top 10 economic forecasts for 2019
The sharp drop-off in world trade growth is a major risk in the coming year.
The global economy started 2018 with strong, synchronized growth. But as the year progressed, momentum faded and growth trends diverged. The US economy accelerated, thanks to fiscal stimulus enacted early in the year, while the economies of the Eurozone, the UK, Japan and China began to weaken. These divergent trends will persist in 2019. IHS Markit predicts global growth will edge down from 3.2% in 2018 to 3.1% in 2019, and keep decelerating over the next few years.
One major risk in the coming year is the sharp drop-off in world trade growth, which fell from over 5% at the beginning of 2018 to nearly zero at the end. With anticipated escalation in trade conflicts, a contraction in world trade could drag down the global economy even more. At the same time, the combined effects of rising interest rates and surging equity and commodity market volatility mean that financial conditions worldwide are tightening. These risks point to the increasing vulnerability of the global economy to further shocks, and the rising probability of a recession in the next couple of years.
1. The US economy will remain above trend
Based on estimates about sustainable growth in the labour force and productivity, we assess the trend, or potential, growth in the US economy to be around 2.0%. In 2018, US growth was well above trend at 2.9%, though the acceleration was almost entirely due to a large dose of fiscal stimulus in the form of tax cuts and spending increases. The impact of this stimulus will still be felt in 2019, but will diminish as the year progresses. As a result, we expect growth of 2.6% in 2019 - less than in 2018, but still above trend.
2. Europe's expansion will slow even more
Eurozone growth peaked in the second half of 2017, and has declined steadily since then. IHS Markit predicts a further decline to 1.5% in 2019. Political uncertainty, including Brexit, challenges to Emmanuel Macron's government, and the winding down of Angela Merkel's chancellorship, are contributing to a decline in business sentiment. Economic factors such as the tightening of credit conditions and heightened trade tensions are also driving the deceleration in growth.
3. Japan's recovery will remain weak, and its economy will grow less than 1% in 2019
Japan's economy is expected to expand by 0.8% in 2018, with this rate increasing only slightly in 2019 to 0.9%. The slowdown in China's economy and the fallout from trade tensions between the US and China are drags on growth. Monetary policy will continue to be ultra-accommodative next year. The cyclical decline in Japan's growth is occurring in an environment of very weak long-term growth. Adverse demographics - specifically a declining labour force - are not being offset by strong enough productivity growth. The "third arrow" of Abenomics, which was supposed to implement significant structural reforms and boost productivity, has been slow to materialize.
4. China's economy will keep decelerating
The quarterly rate of Chinese growth has been steadily edging down since the beginning of 2017, hitting its lowest level in 10 years in the third quarter of 2018. On an annual basis, the pace of expansion has slowed from 6.9% in 2017 to 6.6% in 2018, and will fall further to 6.3% in 2019. In response to recent economic shocks - including the impact of US tariffs, which has so far been limited - policy-makers have unleashed a series of monetary and fiscal measures to help support growth and stabilize financial markets.
However, these measures are likely to remain modest. Credit growth will continue to be constrained by the massive debt overhang and the government's commitment to deleveraging, at least in the medium to long term. On the other hand, the government's stimulus efforts may well become more aggressive if trade tensions with the US (re)escalate and growth is seriously damaged.
5. Emerging market growth will decelerate to 4.6% in 2019
Some economies, including Brazil, India and Russia, experienced a mild pickup in growth in 2018, while others, such as Argentina, South Africa and Turkey, came under intense financial pressure and suffered recessions or near-recessions. Going forward, emerging markets face a number of headwinds, including slowing growth in advanced economies and in the pace of world trade; the strong US dollar; tightening financial conditions; and rising political uncertainty in countries such as Brazil and Mexico. A few countries will be able to buck these trends, especially dynamic economies with low levels of debt, notably in Asia.
6. Commodities markets could be in for another rollercoaster ride in 2019
Demand growth next year still looks strong enough to provide commodity markets with support, making the kind of price collapse seen during 2015 unlikely. However, volatility in commodity markets will continue in 2019, particularly in oil markets. We predict oil prices will rise a bit in the near term and average around $70.0 per barrel over the coming year, compared with an average $71.0 in 2018. That said, the risks to prices of oil and other commodities are predominantly on the downside, given slowing demand growth and rising supply. Despite volatility, we predict that by the end of 2019, prices will be little different from their current readings.
7. Global inflation rates will remain close to 3.0%
Most of the rise in consumer price inflation between 2015 and 2018 - from 2.0% to 3.0% - was due to a transition in the developed world from deflationary, or near deflationary, conditions to inflation rates that are close to central banks' targets of 2.0%. Over the near term, we expect global inflation and developed economy inflation to remain close to 3.0% and 2.0%, respectively.
While there will be upward pressures in many economies as output gaps close and unemployment rates fall - in some cases to multi-decade lows - there are downward pressures as well. Outside the US, growth is weakening. Moreover, relative to 2018, commodity prices will be relatively flat on average in 2019. Finally, with the trade war in a "temporary truce", the upward push from tariff increases will be on hold.
8. The Fed will raise rates, and a few other central banks may follow
With the world's key economies at different points in the business cycle, it is not surprising that central banks are moving at different speeds and in different directions. However, given weaker growth and muted inflationary pressures, the pace of removing accommodation is likely to be even more modest than previously expected.
The US Federal Reserve is likely to raise rates three times in 2019. Other central banks, including the Bank of England (depending on the Brexit process), the Bank of Canada, and a few emerging market central banks - such as those in Brazil, India and Russia - may also raise rates.
The European Central Bank will not hike rates until early 2020. Similarly, we do not believe the Bank of Japan will end its negative interest rate policy until 2021. The People's Bank of China is the one major central bank moving in the opposite direction; worried about growth, it is providing modest stimulus.
9. The US dollar will hold at current elevated levels for much of 2019
Continued above-trend US growth and more rate hikes by the Fed are the primary reasons for this anticipated strength. Given the recent relative calm in forex markets, especially relative to emerging market currencies, another big appreciation of the US dollar seems unlikely.
Nevertheless, the potential for volatility remains very high. Political uncertainty in Europe could be very negative for the euro and sterling; we expect that the euro/dollar rate will end 2019 at around $1.10, compared with $1.14 at the end of 2018. At the same time, we predict that the renminbi/dollar rate will hold fairly steady just below the psychological level of 7.0 - the result of the Chinese government's desire for financial stability.
10. The risks of policy shocks have risen, but probably not enough to trigger a recession in 2019
Policy mistakes remain the biggest threats to global growth in 2019 and beyond. The simmering trade conflicts are dangerous, not because they have done damage so far - they haven't - but because they could easily escalate and get out of control. In addition, rising budget deficits in the US, high debt levels in the US, Europe and Japan, and potential missteps by key central banks all pose threats to the global economy.
The good news is that the probability of such policy mistakes seriously hurting global growth in 2019 is still relatively low. However, IHS Markit believes that the risks of damage from policy mistakes will rise in 2020 and beyond, as growth slows further.
A large new study uses an online game to inoculate people against fake news.
- Researchers from the University of Cambridge use an online game to inoculate people against fake news.
- The study sample included 15,000 players.
- The scientists hope to use such tactics to protect whole societies against disinformation.
Researchers hope the technology will further our understanding of the brain, but lawmakers may not be ready for the ethical challenges.
- Researchers at the Yale School of Medicine successfully restored some functions to pig brains that had been dead for hours.
- They hope the technology will advance our understanding of the brain, potentially developing new treatments for debilitating diseases and disorders.
- The research raises many ethical questions and puts to the test our current understanding of death.
The image of an undead brain coming back to live again is the stuff of science fiction. Not just any science fiction, specifically B-grade sci fi. What instantly springs to mind is the black-and-white horrors of films like Fiend Without a Face. Bad acting. Plastic monstrosities. Visible strings. And a spinal cord that, for some reason, is also a tentacle?
But like any good science fiction, it's only a matter of time before some manner of it seeps into our reality. This week's Nature published the findings of researchers who managed to restore function to pigs' brains that were clinically dead. At least, what we once thought of as dead.
What's dead may never die, it seems
The researchers did not hail from House Greyjoy — "What is dead may never die" — but came largely from the Yale School of Medicine. They connected 32 pig brains to a system called BrainEx. BrainEx is an artificial perfusion system — that is, a system that takes over the functions normally regulated by the organ. The pigs had been killed four hours earlier at a U.S. Department of Agriculture slaughterhouse; their brains completely removed from the skulls.
BrainEx pumped an experiment solution into the brain that essentially mimic blood flow. It brought oxygen and nutrients to the tissues, giving brain cells the resources to begin many normal functions. The cells began consuming and metabolizing sugars. The brains' immune systems kicked in. Neuron samples could carry an electrical signal. Some brain cells even responded to drugs.
The researchers have managed to keep some brains alive for up to 36 hours, and currently do not know if BrainEx can have sustained the brains longer. "It is conceivable we are just preventing the inevitable, and the brain won't be able to recover," said Nenad Sestan, Yale neuroscientist and the lead researcher.
As a control, other brains received either a fake solution or no solution at all. None revived brain activity and deteriorated as normal.
The researchers hope the technology can enhance our ability to study the brain and its cellular functions. One of the main avenues of such studies would be brain disorders and diseases. This could point the way to developing new of treatments for the likes of brain injuries, Alzheimer's, Huntington's, and neurodegenerative conditions.
"This is an extraordinary and very promising breakthrough for neuroscience. It immediately offers a much better model for studying the human brain, which is extraordinarily important, given the vast amount of human suffering from diseases of the mind [and] brain," Nita Farahany, the bioethicists at the Duke University School of Law who wrote the study's commentary, told National Geographic.
An ethical gray matter
Before anyone gets an Island of Dr. Moreau vibe, it's worth noting that the brains did not approach neural activity anywhere near consciousness.
The BrainEx solution contained chemicals that prevented neurons from firing. To be extra cautious, the researchers also monitored the brains for any such activity and were prepared to administer an anesthetic should they have seen signs of consciousness.
Even so, the research signals a massive debate to come regarding medical ethics and our definition of death.
Most countries define death, clinically speaking, as the irreversible loss of brain or circulatory function. This definition was already at odds with some folk- and value-centric understandings, but where do we go if it becomes possible to reverse clinical death with artificial perfusion?
"This is wild," Jonathan Moreno, a bioethicist at the University of Pennsylvania, told the New York Times. "If ever there was an issue that merited big public deliberation on the ethics of science and medicine, this is one."
One possible consequence involves organ donations. Some European countries require emergency responders to use a process that preserves organs when they cannot resuscitate a person. They continue to pump blood throughout the body, but use a "thoracic aortic occlusion balloon" to prevent that blood from reaching the brain.
The system is already controversial because it raises concerns about what caused the patient's death. But what happens when brain death becomes readily reversible? Stuart Younger, a bioethicist at Case Western Reserve University, told Nature that if BrainEx were to become widely available, it could shrink the pool of eligible donors.
"There's a potential conflict here between the interests of potential donors — who might not even be donors — and people who are waiting for organs," he said.
It will be a while before such experiments go anywhere near human subjects. A more immediate ethical question relates to how such experiments harm animal subjects.
Ethical review boards evaluate research protocols and can reject any that causes undue pain, suffering, or distress. Since dead animals feel no pain, suffer no trauma, they are typically approved as subjects. But how do such boards make a judgement regarding the suffering of a "cellularly active" brain? The distress of a partially alive brain?
The dilemma is unprecedented.
Setting new boundaries
Another science fiction story that comes to mind when discussing this story is, of course, Frankenstein. As Farahany told National Geographic: "It is definitely has [sic] a good science-fiction element to it, and it is restoring cellular function where we previously thought impossible. But to have Frankenstein, you need some degree of consciousness, some 'there' there. [The researchers] did not recover any form of consciousness in this study, and it is still unclear if we ever could. But we are one step closer to that possibility."
She's right. The researchers undertook their research for the betterment of humanity, and we may one day reap some unimaginable medical benefits from it. The ethical questions, however, remain as unsettling as the stories they remind us of.
Many governments do not report, or misreport, the numbers of refugees who enter their country.
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