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Financial News: IMF Cuts Global Growth Forecast On Trade Tensions,

IMF Cuts Global Growth Forecast On Trade Tensions, Policy Uncertainty

04/09/2019 - 10:58:00 (RTTNews)

(RTTNews) - The International Monetary Fund on Tuesday slashed the global growth forecast for this year, citing the trade tensions, weaker business confidence, tighter financial conditions and higher policy uncertainty.

The Washington-based global lender cut the growth forecast for this year to 3.3 percent in its latest World Economic Outlook, or WEO, which is released twice a year.

In a January update to the WEO, the IMF had predicted 3.5 percent, which was lower than 3.7 percent seen in the October report. The growth momentum is expected to gain steam in the second half of this year.

Growth for 2020 was projected at 3.6 percent, which was unchanged from the January prediction. "This recovery is precarious and predicated on a rebound in emerging market and developing economies," IMF Chief Economist Gita Gopinath said. Growth in the emerging market and developing economies is projected to rise to 4.8 percent next year from 4.4 percent this year. However, the rebound is based on an expected rebound in growth in Argentina and Turkey and some improvement in other stressed economies, making the prediction subject to considerable uncertainty, the IMF said. "While the global economy continues to grow at a reasonable rate and a global recession is not in the baseline projections, there are many downside risks," Gopinath said.

"Given these risks, it is imperative that costly policy mistakes are avoided," she added.

Beyond 2020, the IMF expects global growth to stabilize at around 3.5 percent, bolstered mainly by growth in China and India and their increasing weights in world income.

Gopinath stressed on the need for greater multilateral cooperation to resolve trade conflicts, to address climate change and risks from cybersecurity, and to improve the effectiveness of international taxation.

"This is a delicate moment for the global econom," she said. "If the downside risks do not materialize and the policy support put in place is effective, global growth should rebound."

Advanced economies are projected to grow 1.8 percent this year, which is slower than the January prediction of 2 percent. The forecast for next year was retained at 1.7 percent.

The US growth forecast for this year was slashed to 2.3 percent from 2.5 percent. The outlook for next year was raised to 1.9 percent from 1.8 percent.

Eurozone's growth projection for this year was trimmed to 1.3 percent from 1.6 percent and the outlook for next year was cut to 1.5 percent from 1.7 percent. The big four euro area economies - Germany, France, Italy and Spain - are forecast to grow in both years, though their forecasts for this year were trimmed. The 2020 projection for Germany and France were cut. The UK growth forecast for this year was slashed to 1.2 percent from 1.5 percent and the outlook for next year was trimmed to 1.4 percent from 1.6 percent.

The IMF warned that the UK economy would lose about 3.5 percent of GDP by 2021 in a no-deal Brexit. Japan and Canada also had their growth forecast for this year downgraded.

Among emerging market and developing economies, China's growth forecast for this year was raised to 6.3 percent from 6.2 percent. The outlook for next year was lowered to 6.1 from 6.2 percent. India, where the general election starts this week, had its growth outlook for this year cut to 7.3 percent from 7.5 percent. The projection for next year was slashed to 7.5 percent from 7.7 percent.

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