What’s the budget outlook for the international economy, export growth and major trading partners?
The ECA has reviewed the 2019-20 Budget’s economic outlook and identified the key points for its members.
- Exports are forecast to grow by 4 per cent in 2019 20, driven by mining and services exports
> Export growth is forecast to slow to 1½ per cent in 2020 21, largely as growth in mining exports slows to ½ per cent. However, services exports are forecast to grow by 3½ per cent and rural exports by 4 per cent.
- Global growth estimated to be 3.7% in 2017 and 2018, forecast to be 3½ per cent in 2019, 2020 and 2021
- Major trading partner growth is forecast to be 4 per cent in 2019, 2020 and 2021
> Growth in the Asian region remains relatively strong
- There is a high degree of uncertainty around the global growth outlook amid a range of economic and geopolitical risks
- Trade policy uncertainty remains elevated between a number of economies and global trade growth has eased
> Uncertain outlook for trade tensions has been weighing on confidence, new export orders and investment intentions
- Over the longer term, unfavourable demographics will constrain potential growth rates in some of the world’s major economies
Table 2: International GDP growth forecasts (a)
(a) World and other East Asia growth rates are calculated using GDP weights based on purchasing power parity (PPP), while growth rates for major trading partners are calculated using goods export trade weights.
(a) Other East Asia comprises the Association of Southeast Asian Nations group of five (ASEAN 5), comprising Indonesia, Malaysia, the Philippines, Thailand and Vietnam, along with Hong Kong, South Korea, Singapore and Taiwan.
(b) These growth rates are estimates in 2018 rather than outcomes.
Source: National statistical agencies, Refinitiv, International Monetary Fund and Treasury.
- Growth in China slowed to 6.6 per cent in 2018. There are signs of weakness in China’s trade outlook, reflecting both trade tensions and a softer
global outlook. A softening of growth is expected from 2021, reflecting the longer-term structural adjustments that China faces, including a declining
working age population.
- The United States economy continues to grow solidly. Most leading indicators remain favourable, suggesting that above-potential growth will
be sustained in 2019
- India’s economic growth will depend on its reform agenda following the national elections in the first half of 2019
- Japan’s growth is expected to pick up slightly in 2019 to 1%. Real GDP growth is forecast to moderate in 2020.
- There was a broad-based weakening in momentum in the Euro Area which is expected to persist in the near term. Ongoing uncertainty related to
geopolitical factors, the threat of protectionism, financial sector risks in Italy and continued uncertainty over Brexit, including the possibility
of the United Kingdom leaving the European Union without an agreement in place, remain risks for euro area growth.
- ASEAN-5 (Singapore, Vietnam, Thailand, Malaysia and the Philippines) economies continue to perform solidly, with domestic demand and favourable demographics supporting growth. However, these economies face some challenges this year, including moderating global trade growth and election uncertainty.