The IMF on Monday predicted the world economy would strengthen this year, albeit at a slightly weaker pace than previously anticipated amid threats related to trade and tensions in the Middle East.
Global growth would accelerate this year to 3.3 percent from 2.9 percent last year, the IMF said.
That is the first pickup in three years, but less than the 3.4 percent projected in October last year.
However, the report contained some modest hope, saying that risks are “less skewed” toward negative outcomes.
That outlook would be keenly discussed this week at the World Economic Forum’s annual meeting in Davos, Switzerland.
The sense that global growth is stabilizing is shared by many economists and some central banks.
For the IMF, which sees growth accelerating to 3.4 percent next year, the positives include signs that the slump in manufacturing and global trade is bottoming out, “intermittent” good news on US-China trade talks and accommodative monetary policy.
It upgraded China’s outlook on the back of the “phase one” deal with the US, but IMF chief economist Gita Gopinath said that the key thing is for both countries to push on and come up with a more durable agreement.
“If these tensions return, that will undo all of the improvements in policy uncertainty that we’ve seen recently,” she told Bloomberg Television. “It’s a bit of a wait and watch.”
The IMF also quantified the impact of central banks’ efforts to shore up growth last year.
It said expansion last year and this year would be 0.5 percentage points weaker without their stimulus.
BlackRock Inc vice chairman Philip Hildebrand described that effort as an “extraordinary pivot back to easier monetary policy” that would help growth edge up this year.
The big drag on the new IMF forecasts was India, where this year’s outlook was slashed by more than 1 percentage point.
There were also modest downgrades to projections for the US and the eurozone.
The prediction for global trade volume growth was cut to 2.9 percent from 3.2 percent, though that would still be far better than last year’s 1 percent.
There is also a clear impact from the US-China trade pact.
It reduces the cumulative negative effect on output from the dispute through this year to 0.5 percent from 0.8 percent, the IMF said.
While risks have eased, the IMF was clear that there is still plenty to worry about.
Progress in trade talks is stop-start, simmering US-Iran tensions could hit oil supply, and there is also social unrest and weather-related disasters.
“The risk of protracted subpar global growth remains tangible, despite tentative signs of stabilizing momentum,” it said.
Separately, PricewaterhouseCoopers LLP (PwC) released a survey which showed that the proportion of chief executive officers expecting global growth to slow in the coming year had risen 10-fold since 2018.
That means that more than half of the 1,581 chief executives questioned in 83 countries see the pace of expansion slowing, the most since PwC began asking the question in 2012.
The survey was conducted from September to October last year.
The IMF held or reduced its estimates for most of the world’s biggest economies for this year, with Japan a notable exception. It raised the outlook to 0.7 percent from 0.5 percent, reflecting the anticipated boost from stimulus measures undertaken last month.
It raised China’s estimate by 0.2 percentage points to 6 percent.
The “phase one” trade deal is likely to alleviate near-term cyclical weakness, though unresolved disputes on broader US-China economic relations “will continue weighing on activity,” the IMF said.
This year’s estimate for the US was lowered by 0.1 percentage points to 2 percent, and next year held at 1.7 percent.
India’s downgrade was because domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth, the IMF said.
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