Global economy sharply slowed according to IMF growth forecast
The global economy has sharply slowed since last summer and will depend on a “precarious” uplift from a few emerging markets to reverse such declining, the IMF has predicted in its latest World Economic Outlook.
IMF Chief Economist Gita Gopinath represented latest economic forecast during the joint gathering of the International Monetary Fund (IMF) and World Bank a taking place in Washington.
In addition, the fund judged that advanced economies would “continue to slow gradually” into next year cutting its outlook for 2019 and 2020, while emerging economies would play a more positive role led by an end to crisis conditions in Turkey and Argentina and stabilisation in the all-important Chinese growth rate.
The IMF said that Global growth slowed sharply in the second half of 2018 from 3.8 per cent in the first half to only 3.2 per cent, with industrial production and world trade hit hard. Growth rates would have fallen further without consumer sentiment holding up strongly.
This slowdown led the fund to sharply cut its forecast for 2019, with the world economy now expected to grow 3.3 per cent in 2019, down 0.4 percentage points since the last full forecast in October 2018. The projected growth rate for 2020 was down 0.1 percentage point to 3.6 per cent.
The risk of further downward revisions is high, with IMF still concerned about an escalation in global trade tensions, further shocks to the European economy and a potential failure of China’s recent stimulus.
Gopinath said: “Tensions in trade policy could flare up again and play out in other areas such as the auto sector . . . growth in the eurozone and China could surprise on the downside and risks surrounding Brexit remain high.”
If risks materialise, “this may require synchronised, though country-specific fiscal stimulus complemented by accommodate monetary policy”.
The IMF further urged countries to resolve trade differences, which it said “have taken an increasing toll on sentiment”, and be ready to use fiscal tools of tax cuts and public spending increases to inject spending directly into economies if the slowdown continues.
The forecasts for advanced economies suggested there would be some recovery from specific woes last year in Germany, France and Italy, but there would be no return to the rapid expansion of 2017 and instead “a return to tepid potential growth” by 2020.
For the US, the IMF forecast that the annual growth rate would continue to slow and by the time of the next presidential election in 2020 it would be only 1.7 per cent — barely over half the rate in the final quarter of 2018, when it was 3 per cent.
However, The fund said the global economy may sustain reasonable annual growth rates of around 3.6 per cent in the first half of the 2020s.
The IMF forecasts further showed that 1bn people in 41 countries in Africa, the Middle East and parts of Asia are likely to see gross domestic product per person grow more slowly than in advanced economies. With maany of the poorest economies would see living standards fall further behind rich-country benchmarks.
The IMF recommended that countries use fiscal and monetary policies to offset the slowdown and if risks materialise should engage in a co-ordinated fiscal stimulus to shore up private spending.
