IMF cuts global growth forecast to joint lowest level since crisis

US-ECONOMY-IMF

The International Monetary Fund said the German economy will now grow just 0.8 per cent in 2019

The IMF said the US-China trade war and a potentially disorderly British exit from the European Union are key risks to the global economy.

According to the IMF's outlook report, China is on a low growth trajectory as its economy matures: it grew by 6.6 per cent last year and is projected to slow down to 6.3 per cent this year and 6.1 next year.

The IMF expects growth in world trade to drop to 3.4 per cent this year - a sharp slowdown from the 4 per cent it had expected in January and from 3.8 per cent trade growth in 2018.

The outlook partly reflects brighter prospects for trade negotiations between China and the United States.

"This is a delicate year for the global economy", the report reads. "This recovery is precarious and predicated on a rebound in emerging market and developing economies", including Argentina and Turkey.

Gopinath said the uptick "is supported by significant monetary policy accommodation by major economies, made possible by the absence of inflationary pressures despite growing at near potential". -China trade tensions have improved as a trade agreement is expected to take shape.

Beyond 2020, global growth is expected to level out at 3.6% over the medium term, driven by a moderation in expansion in advanced countries (caused by weak productivity growth and slow labour force growth) and the stabilisation of emerging market expansion at 2020 levels. Global growth softened to 3.6 per cent in 2018 and is projected to decline further to 3.3 per cent in 2019. If the deal disintegrates, the US economy could face harmful fallout, as it faces losing the partnership of its two biggest trade partners, Mexico and Canada. Ms Gopinath warned that global trade tensions could flare up again and spread into new areas, which could lead to disruptions to global supply chains.

It maintained its projections for Saudi Arabia, saying the region's leading economy is expected to grow by a muted 1.8 percent this year and 2.1 percent in 2020.

"This could result in higher USA interest rates, renewed dollar appreciation, and tighter financial conditions for emerging market and developing economies with balance sheet vulnerabilities", the report said.

The International Monetary Fund (IMF) kept its growth outlook for South Korea for 2019 unchanged at 2.6 percent, displaying confidence in the Korean government's aggressive fiscal and monetary policy to prop up the economy against escalated uncertainties on the global front.

In the coming fiscal year, the projected GDP growth is likely to remain at 2.8 %, nearly the lowest in a decade.

"China's growth is set to stabilize", said Cheng Shi, chief economist at ICBC International.

Instead, China should continue its focus on deleveraging and rebalancing its economy away from credit-based expansion to a economy is more sustainable and provides growth based on private consumption.

"Given these risks, it is imperative that costly policy mistakes are avoided", she said, urging cooperation among governments-especially in trade conflicts-to avoid fueling uncertainty that could contribute to a slowdown.

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