2018 ended on a challenging note for the global economy with a significant loss of growth momentum in China and Europe, and the United States caught in a government shutdown. Combined with the uncertainty headwinds from ongoing trade tensions and Brexit negotiations, it’s no wonder that financial markets suffered a year-end slump.

Entering 2019, investors have taken some comfort from the re-opening of the US government, positive rhetoric on the US-China trade talks and a more dovish tone from the major central banks, indicating that further monetary policy tightening is on hold for now. Equally important, the Unites States is now joined by China and France in delivering a more substantial fiscal boost to their respective economies. Nonetheless, important questions remain open and just how these unfold over the coming weeks will be key for the outlook of 2019. Consider these in chronological order.

Curve + card

Will the US government shutdown resume?

President Trump is determined to build a wall on the border with Mexico and is threatening to resume the government shutdown on 15 February or declare a “national emergency” and use military resources to build the wall. The legality of the latter option is open to question and even Republican members of Congress are worried by the precedent this might set. In the event the government shutdown continues, this would cost the US economy an estimated 0.1% of annualised growth per week.

Will 2019 see an easing of trade tension?

A recent tweet from President Trump hinted at a good chance that he and President Xi will conclude a trade deal when they meet at the end of February. If confirmed, this would come as welcome news. Trade developments between the US and the European Union also merit attention however. The US Commerce Department is currently finalising a report due 17 February that could see car imports declared a national security risk. In turn, this would allow President Trump to slap on tariffs, opening a new front in global trade tensions and one that would be particularly painful for Germany and Japan. Keeping in mind that a full-blown trade war could see global GDP growth in 2019 cut by almost 1%, developments on both these fronts are critical.

Michala Marcussen Group Chief Economist


Our baseline assumption is that
the worst-case outcomes will be avoided, paving the way for continued expansion in 2019,
albeit at a slower pace than
in 2018.

Will no-deal Brexit be avoided?

The United Kingdom is due to leave the European Union on 29 March 2019 at midnight, but even with less than 50 days left until Brexit, significant uncertainty remains as to whether the UK will leave with a deal, seek delay to allow more time to find a solution or leave with no deal. We estimate that a disorderly no-deal Brexit would plunge the UK into recession with significant spill-over effects to the euro area.

The three questions listed above are not the only question marks that 2019 holds; importantly the spring will bring the European Parliamentary elections that will be a key determinant for the course that European integration will take well into the next decade. Common to all three points above, however, is that answers should be forthcoming within just a few weeks and their economic impact will be significant even in the short-term.