Investment bank UBS forecasted on Thursday that the global economy will most likely rebound by the fourth quarter of 2020, with momentum starting to build up as early as the second half of the year.
According to CNBC, APAC head of asset allocation at UBS Global Wealth Management's Chief Investment Office, Adrian Zuercher, explained that recovery will probably be driven by central banks moving back to conventional ways to ease economic pressure.
Among the strategies that central banks are expected to take are expanding balance sheets, printing more money, and as other institutions have already done over the past quarters, slashing interest rates further.
Zuercher further explained that the "fog around trade" affected the Swiss bank's forecast on the global economy. He argued that tariffs on both Chinese and American goods will be a major risk in how the economy will shift in the coming year.
Despite some uncertainty in trade tensions between the two economic powers, Zuercher pointed out that analysts are optimistic of "phase one" of the China-U.S. trade deal to be agreed on, which could then help the economy bounce back in the long run.
"That should be good enough for the economy to slow recovery," Zuercher said of the possibility that tariffs set to take effect on December 15 will be lifted as part of the "phase one" deal.
While the China-U.S. trade war has had a significant impact on the global decline, it's not all there is to the downtrend. The shrinking of global balance sheets also played a major role on slowing down the global economy, UBS bank said.
UBS isn't the only multinational banking institution that believes there are good signs of a rebound for the global economy. According to Hellenic Shipping News, Deutsche Bank strategists forecasted that an "improvement" will be felt in 2020.
Duetsche Bank analysts Jim Reid, Quinn Brody, and Henry Allen wrote in a report this week that while they can see a recovery next year, there are still potential risks such as global trade tensions outside the China-U.S. trade war.
The report said among the risks are tariffs on the eurozone that could propel recessions around the European Union and beyond, as well as a no-deal Brexit in 2020, and increasing tensions between Saudi Arabia and Iran.
U.S. President Donald Trump has also threatened to slap tariffs on Brazilian steel products. Argentina is another country that could be affected by steel tariffs from the White House, and these issues could play a role in how the economy will fare next year.
