Warning of Possible Economic Slowdown

Faced with the threat of a global economic slowdown and the possibility of the U.S. entering recession next year, businessmen in the region argue that to mitigate possible adverse effects, it is key to diversify export destinations.

Friday, August 16, 2019

Market analysts assure that the slowdown in U.S. economic activity is already a reality, and that what is still not clear, is the possibility that the economy will go into recession next year. The recent reversal of the U.S. bond curve, which historically has been the signal that warns of a recession in the short term, may not mean the same on this time, say some U.S. brokerage firms.
The reality is that the risk of recession is clear, and we will have to wait and see what direction the economy is heading and what kind of measures the Trump administration will take, mainly on sensitive issues, such as the trade "war" with China.

Also, other countries such as Germany are entering a phase of economic recession, a situation that would further aggravate the global outlook, as the decline in economic growth would affect sales in the region.

José Félix Solís, former manager of economic studies at the Central Bank of Nicaragua, explained to Elnuevodiario.com.ni that "... It is being seen that the yield curve of the U.S. economy is reversed. When the long-term interest rates of treasury bonds are lower than those of the short term, it is a signal that future inflation is expected. The economy therefore must lower interest rates but will enter a recessionary phase. The most natural thing is for the 10-year rate to be higher than the one-year rate, but when that is reversed, a recession is very likely."

For Dean Garcia, director of the Nicaraguan Association of the Textile and Clothing Industry (Anitec), in the scenario that forecasts the "... idea is to look for new markets, or emerging markets, where we can place our products that we cannot sell in our traditional markets. The plan we have is to explore the European Union market in a good way, because what we really export to Europe is relatively small as a sector. So, it would be to explore to find out what opportunities we find there."

According to Garcia, the U.S. economic recession will quickly be reflected in the decline in exports and the fall in global prices.

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