Global Economic Risk Outlook. Third quarter 2019

This report presents an analysis of those global shocks, most of low probability, which may have severe effects on the economy. The balance of risks continues to be tilted to the downside due to trade tensions (impact on China) and increasing probability of recession in the US.

Key points

• Key points:
• A full-scale trade war remains in the center of the stage despite the recent truce in China-US disputes, given the huge distance between the two sides on issues like technology, subsidies or charged tariffs.
• We highlight the relevance of a recession in the US and a disorderly deleveraging in China as risk scenarios. In the case of the US, economic indicators continue to surprise on the downside, edging up the probability of recession one year ahead. In China, policy easing to face trade woes threatens to increase existing financial vulnerabilities in the medium term.
• Concerns on debt sustainability in the Eurozone and a protracted stagnation in DM remain on the table.
• It is also key to monitor the Fed’s reaction amidst the review of monetary policy framework, the risk of recession in Europe, and the impact of climate change.

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