US-China trade war may cost US$700 billion by 2020 in synchronised global slowdown, new IMF chief says
- Global growth rate this year is expected to slow to lowest rate in a decade, new IMF head Kristalina Georgieva says
- Global corporate debt at risk of default in event of global downturn would be higher than during global financial crisis, the economist warns
The trade war between China and the United States could cost an increasingly fractured global economy about US$700 billion, or 0.8 per cent of gross domestic product, by 2020, Kristalina Georgieva said in her maiden speech as International Monetary Fund chief on Tuesday.
“We have spoken in the past about the dangers of trade disputes. Now, we see that they are actually taking a toll,” the Bulgarian economist said, according to a text of her opening address to the annual International Monetary Fund (IMF)/World Bank meetings in Washington.
In updated economic forecasts scheduled for release next week, the IMF, an organisation of 189 countries working to increase global monetary cooperation, is expected to downgrade the global growth outlook for the fifth time since October 2018. In July, it projected that the world economy would grow 3.2 per cent this year and 3.5 per cent in 2020.
New IMF analysis also suggests that if a major global downturn were to occur, corporate debt at risk of default would rise to US$19 trillion, or nearly 40 per cent of the total debt in eight major economies – and above the level seen during the global financial crisis a decade ago, Georgieva said.