Thu, Oct 17, 2019 - Page 10 News List

IMF downgrades economic outlook

WARNING:The global economy slowed even as central banks worldwide has been cutting rates, leaving them with little room in a crisis, the IMF’s chief economist said


The IMF has further downgraded its outlook for the world economy, predicting that growth this year would be the weakest since the 2008 financial crisis, primarily because of widening global conflicts.

The IMF’s latest World Economic Outlook, released on Tuesday, foresees a slight rebound next year, but warns of threats ranging from heightened political tensions in the Middle East to the threat that the US and China will fail to prevent their trade dispute from escalating.

The new forecast predicts global growth of 3 percent this year, down 0.2 percentage points from the IMF’s previous forecast in July and sharply below the 3.6 percent growth of last year.

It would be the weakest year since global growth was minus-0.1 percent in 2009 as the global economy struggled with the shockwaves from the 2008 financial crisis.

For the US this year, the IMF projected a modest 2.4 percent gain, down from 2.9 percent last year.

Next year, it foresees a rebound for the world economy to 3.4 percent growth, but a further slowdown in the US to 2.1 percent, far below the 3 percent growth that the US President Donald Trump’s administration has projected.

IMF economists said that even its projected modest gains might not be realized.

“With a synchronized slowdown and uncertain recovery, there is no room for policy mistakes, and an urgent need for policymakers to cooperatively de-escalate trade and geopolitical tensions,” IMF chief economist Gita Gopinath said.

The IMF’s forecast predicted that about half the increase in growth expected next year would result from recoveries in countries where economies slowed significantly this year, as in Mexico, India, Russia and Saudi Arabia.

The global economy would also get a boost from recoveries or at least more shallow recessions in various stressed emerging-market economies such as Turkey, Argentina and Iran.

The report said that the expected rebound would represent a modest bounceback after steep economic declines this year.

One worrisome development is that the slowdown this year has occurred even as the US Federal Reserve and other central banks have been cutting interest rates and deploying other means to bolster economies, IMF economists said.

The IMF estimated that global growth would have been about one-half percentage point lower this year and next year without the central banks’ efforts to ease borrowing rates.

“With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot,” Gopinath said.

In addition to trade and geopolitical risks, the IMF envisions threats arising from a potentially disruptive exit by the UK from the EU on Oct. 31.

The IMF urged policymakers to intensify their efforts to avoid economically damaging mistakes.

“As policy priorities go, undoing the trade barriers put in place with durable agreements and reining in geopolitical tensions top the list,” Gopinath said. “Such actions can significantly boost confidence, rejuvenate investment, halt the slide in trade and manufacturing and raise world growth.”

The IMF projected that growth in the 19-nation eurozone would slow to 1.2 percent this year, after a 1.9 percent gain last year.

It expected the pace to recover only slightly to 1.4 percent next year.

Growth in Germany, Europe’s biggest economy, is expected to be a modest 0.5 percent this year before rising to 1.2 percent next year.

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