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The View
OpinionComment
Dan Steinbock
Dan Steinbock

The View | As a financial crisis looms and refugee crises worsen, the world seems to have forgotten the lessons of 1945

  • Global growth is unlikely to recover soon, given not only the US-China trade war but also geopolitical tensions
  • Around the world, the number of forcibly displaced people has hit a record high

Reading Time:3 minutes
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US President Donald Trump receives a letter presented to him by Chinese Vice-Premier Liu He in the Oval Office of the White House on October 11. Photo: AP
Dan Steinbock
In its new report, the International Monetary Fund forecasts global growth in 2019 of 3 per cent, the lowest since the global financial crisis of 2008-9. This is largely due to the US-China tariff war, which has contributed to a projected slowdown in the United States and China.
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The IMF expects growth to pick up to 3.4 per cent in 2020. That, however, is predicated on improvements in a number of emerging economies in Latin America, the Middle East and Europe, which, in turn, would require a trade recovery. Thanks to the global slowdown, world growth prospects now hover at 2008-9 levels.

At the peak of globalisation, the Baltic Dry Index (BDI) was often used as a barometer for international commodity trade. The index soared to a record high, 11,793 points, in May 2008. But as the crisis spread in the advanced West, it plunged 94 per cent to 663 points.

Last February, the BDI sank to 595 points. In September, optimistic speculation drove the index up to 2,500. Now it’s back to around 1,900, about 85 per cent below its peak. Unfortunately, broader measures of global economic engagement are equally dire.

Global economic integration is usually measured in world trade, investment and migration. Before the 2008 crisis, world investment soared to almost US$2 trillion. Before the Donald Trump presidency, the UN predicted that global foreign direct investment would resume growth in 2017 and surpass US$1.8 trillion in 2018.

At the time, I said the improvement was unlikely and world investment would either continue to stagnate or worse. This has proved true. In 2018, global foreign direct investment slid 13 per cent to US$1.3 trillion, the third consecutive annual decline.

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