Chief economist update: A busy 2020 for Abe, BOJ

The world economy would advance by 2.5% this year, a tad stronger than the "post-crisis low" of 2.4% estimated for 2019.

This is the World Bank's prediction contained in its January 2020 'Global Economic Prospects' report, noting that: "While growth could be stronger if reduced trade tensions lead to a sustained reduction in uncertainty, the balance of risks to the outlook is to the downside. Growth in emerging market and developing economies (EMDEs) is also expected to remain subdued, continuing a decade of disappointing outcomes."

World Bank projections show US economic growth slowing from an estimated 1.6% in 2019 to 1.4% this year - a 0.1 pps downgrade from its June 2019 forecasts -- before re-accelerating to 1.5% in 2021. It downgraded its forecasts for the Eurozone to 1.1% in 2019 (0.2 pps lower than the June prediction) and sees growth in the single currency region slowing to 1.8% in 2020 and 1.7% in 2021 - both raised by 0.1 pps.

The World Bank report was a bit kinder on Japan, so it seems.

Japanese GDP growth is expected to accelerate to 1.1% in 2019 - an upward revision of 0.3 pps - from 0.8% in 2018 and has left its forecast for 2020 and 2021 unchanged.

That may be but the World Bank's forecasts show Japanese economic growth slowing to 0.7% this year, 0.6% in 2021 and 0.4% in 2022.

According to the 'Global Economic Prospects' report: "Activity in Japan declined sharply following the impact of Typhoon Hagibis and the increase in the value-added tax (VAT) in October last year. The economy is also suffering from acute weakness in manufacturing and exports, particularly those to China, alongside declining consumer confidence."

"In response, the government is providing significant support. Despite recent weakness in activity, the unemployment rate remains near multidecade lows, labor force participation continues to climb, and per capita income growth remains healthy."

Get that? No, I didn't get it either. Is it positive on Japan's prospects or...

To be fair, a look at Japan's latest indicators also shows conflicting signals.

On the positive side, the Nikkei-225 index continues to rally. It gained 18.2% in 2019 and by 0.8% this year to date. The yen has depreciated by 4.1% versus the greenback to ¥109.57 from last year's high of ¥105.08.

Then again, the Jibun Bank PMI indices point to persistent weakness with all three indices at contraction levels. The Composite PMI fell to 48.6 in December as manufacturing (48.4) and services (49.4) both weakened.

The Bank of Japan and the Abe government will be trying to shore up the economy this year.

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