Asian business confidence hit a three-year low amid a dragging trade feud between the United States and China and a slow-down of the broader global economy. The Thomson Reuters/INSEAD Asian Business sentiment reached a score of 58, falling from 63. The index measures 100 Asian firms six-month outlook.
Among the main causes of the decline that were reported by the survey respondents was the trade feud which stood out prominently as the most important factor, followed by the higher interest rates and a slowing down the Chinese economy.
The trade war between the United States and China, which was put on hold while negotiations have been developing, seems to be going towards a happy resolution according to recent optimistic statements by the involved parties. However, the tenuous Asian economic situation is giving investors reasons to be concerned, as Chinese, Japanese and South Korean exports seem to be weakening.
This, together with the political and economic situation in Europe and the ongoing trade tensions between the United States and other countries, is suggesting an upcoming global recession. However, the index shows that the respondents are relatively optimistic about the future of the economy.
Eastern Europe is also following this trend. The formerly Communist Bloc, which still lags behind Western Europe in terms of economic development, experienced a meteoric rise since the fall of the Berlin Wall, gaining around 7% almost every year until the last global economic crisis. The 2015 Russian economic crisis also contributed to the economic slowdown, dragging the adjacent countries.
The International Monetary Fund (IMF) expects the region to decelerate in the upcoming years. If the IMF's forecasts turn out to be right, then the region will grow 2.5% this 2019, 2.4% and 2.2% in 2020 and 2021 respectively, making a prompt convergence with Western Europe even less likely.
Meanwhile, global uncertainty keeps increasing. A few days before we reach the Brexit deadline we still don't know if Britain will leave the European Union in a disorderly manner, and an unclear Federal Reserve monetary policy is certainly not helping to alleviate the concerns.