Global economic slowdown in 2019 is a 'healthy necessity': S&P

Global growth will slow this year led by the US and China, a development that is both “necessary and healthy”, S&P Global Ratings said in a recent report.

Overall, the rate of expansion for the global economy will fall to 3.6 percent in 2019 from a six-year high of 3.8 percent last year, it added.

"Most of the action will come from the US," said Paul Gruenwald, Chief Economist for S&P Global Ratings.

"The drivers will be the waning fiscal stimulus from personal and corporate tax cuts, as well as the continuation of the gradual rate normalization by the Federal Reserve," he added.

US and Chinese officials are set to begin talks today aimed at resolving their damaging trade dispute. The two-day talks is the first official meeting since both the countries agreed to refrain from any further tariffs for 90 days in December.

According to S&P, China's growth story will likely be less dramatic than that of the US as the authorities have taken a number of policy-easing measures, including lowering the reserve requirement for smaller banks and enacting fiscal stimulus in the form of ramped-up infrastructure spending.

This mild stimulus will cushion the slowdown, resulting in a continued steady decline in reported growth and a lowering of the official target in 2019 from around 6.5 percent this year, the report noted.

Meanwhile, growth in Europe will continue to decline with domestic demand the main driver of activity.

“Consumption will benefit from falling unemployment, rising wages, and lower energy prices. The weakness in the third quarter 2018 was temporary, and we are forecasting growth of 1.6 percent for 2019, from 1.9 percent in 2018," S&P stated.