IMF cuts forecast for global economic growth in 2019 amid trade tensions
- Fund expects global growth this year of 3.5 per cent, down from the 3.7 per cent it forecast for 2019 in October
The International Monetary Fund has cut its forecast for world economic growth this year, citing heightened trade tensions and rising interest rates in the United States.
The IMF said on Monday it expects global growth this year of 3.5 per cent, down from 3.7 per cent in 2018 and from the 3.7 per cent it had forecast for 2019 in October.
“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” said Christine Lagarde, the IMF managing director, as she presented the new forecast at the World Economic Forum in Davos, Switzerland.
The fund left its prediction for US growth this year unchanged at 2.5 per cent – although a continuation of the partial 31-day shutdown of its federal government poses a risk. The IMF trimmed the outlook for the 19 countries that use the euro currency to 1.6 per cent from 1.8 per cent.
Growth in emerging-market countries is forecast to slow to 4.5 per cent from 4.6 per cent in 2018. The IMF expects the Chinese economy – the world’s second biggest – to grow 6.2 per cent this year, down from 6.6 per cent in 2018 and slowest since 1990.
The World Bank and the Organisation for Economic Cooperation and Development have also downgraded their world growth forecasts.
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And rising trade tensions pose a major risk to the wider world economy. Under President Donald Trump, the US has imposed import taxes on steel, aluminium and hundreds of Chinese products, drawing retaliation from China and other US trading partners.
“Higher trade uncertainty will further dampen investment and disrupt global supply chains,” said Gita Gopinath, the IMF’s chief economist.
Rising interest rates in the US and elsewhere are also pinching emerging-market governments and companies that borrowed heavily when rates were ultra-low in the aftermath of the 2007-2009 financial crisis.
As the debts roll over, these borrowers have to refinance at higher rates. A rising dollar is also making things harder for emerging-market borrowers who took out loans denominated in the US dollar.
