IMF cuts global growth outlook, warns of growing risks

Written by on January 21, 2019 in World - Comments Off on IMF cuts global growth outlook, warns of growing risks

In the latest update to its World Economic Outlook (WEO), the International Monetary Fund (IMF) revised its global growth forecast for 2019 and 2020 downward, citing softer momentum in the second half of 2018 and weakening financial market sentiment.

The global economy is now expected to grow 3.5 per cent this year and 3.6 per cent in 2020, or 0.2 percentage points and 0.1 percentage points down from October 2018, respectively. In 2018, the global economy grew by 3.7 per cent, IMF said.

The forecast reflected a “persistent decline” in the growth rate of advanced economies, which happened sooner than anticipated, and a “temporary decline” in the growth rate for emerging market and developing economies, due to the contractions in Argentina and Turkey, but also the impact of trade actions on China and other Asian economies.

In Europe, euro zone economic growth was expected to slow down from 1.8 per cent in 2018 to 1.6 per cent this year, a 0.3 percentage points cut from the previous forecast. Three of its largest economies – Germany, France and Italy – were all expected to see slower growth than previously projected.

Regarding the UK economy, the IMF said that there was “substantial uncertainty” around the 1.5 per cent growth baseline projection, which assumed that a Brexit deal would be reached in 2019. “However, as of mid-January, the shape that Brexit will ultimately take remains highly uncertain,” the Fund said.

As regards the key risks to the forecast, the IMF said that the balance remained skewed to the downside, as in the October report. “An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook,” the Fund said.

(Photo: Piotr Lewandowski/sxc.hu)

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