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The International Monetary Fund’s chief economist, Gita Gopinath, said that the global economy is at a “delicate moment”.
Ms Gopinath doesn’t expect a global recession, but said that there are “many downside risks”.
In its latest World Economic Outlook report, the IMF forecasts global economic growth of 3.3% this year, a downward revision in growth of 0.2 percentage points from its January projection.
The downgrade reflects negative revisions for several major economies including the euro area, Latin America, the United States, the United Kingdom, Canada, and Australia. The IMF expects a decline in growth this year for 70% of the global economy.
“This is a delicate moment,” Gita Gopinath said at a press briefing in Washington.
Growth is forecast to pickup in the second half of 2019 – supported by monetary policy accommodation by major economies.
The IMF expects global economic growth to rebound next year. The organization projects global economic growth of 3.6% in 2020.
According to a blog post by Ms Gopinath, the recovery next year “is precarious and predicated on a rebound in emerging market and developing economies”, where growth is expected to rise from 4.4% this year to 4.8% in 2020.
Risks to global growth are prevalent though. Ms Gopinath warned that global trade tensions could flare up again and spread into new areas, which could lead to disruptions to global supply chains.
Ms Gopinath said: “Tensions in trade policy could flare up again and play out in other areas (such as the auto industry), with large disruptions to global supply chains. Growth in systemic economies such as the euro area and China may surprise on the downside, and the risks surrounding Brexit remain heightened. A deterioration in market sentiment could rapidly tighten financing conditions in an environment of large private and public sector debt in many countries, including sovereign-bank doom loop risks.”
“There is a 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,” the IMF said in its latest World Economic Outlook.
Video – Press Briefing: World Economic Outlook (WEO)