The world economy is likely to grow by around 3% this year, the lower end of the 3.0-3.5% range expected six months ago. Creating frictions, two tectonic plates underlying activity are shifting: trade after the US-China conflict escalated, and economic policy.
China is expanding fiscal policy and others may follow, perhaps Germany and the United States. Monetary tightening is off the table and some may loosen policy. However, fears may rise as to whether monetary policy can respond to financial instability and fiscal policy can meet structural reform needs.
Indeed, prolonged weakness is more likely than outright recession but forecasts rest on stable Chinese and US growth, stronger German and Indian growth and whether especially vulnerable emerging markets worsen or improve ahead.