The International Monetary Fund (IMF) lowered its global growth forecasts for 2019 and 2020 amid heightened trade and technology tensions.
According to its ‘World Economic Outlook, July 2019’ report, the Fund expects global economic growth of 3.2% in 2019 and 3.5% in 2020 – a drop of 0.1% for both years compared to its April forecast. The downgrade comes after previous significant downward revisions.
The IMF said: “Global growth remains subdued. Since the April World Economic Outlook (WEO) report, the United States further increased tariffs on certain Chinese imports and China retaliated by raising tariffs on a subset of US imports. Additional escalation was averted following the June G20 summit. Global technology supply chains were threatened by the prospect of US sanctions, Brexit-related uncertainty continued, and rising geopolitical tensions roiled energy prices.”
The most significant downward revisions were in some of the world’s major emerging economies, including Brazil, India and South Africa.
For advanced economies, growth is projected at 1.9% in 2019, 0.1% higher than the previous forecast, before rising to 4.7% in 2020.
The emerging market and developing economies group is now forecast to grow by 4.1% in 2019 and 4.7% in 2020, reflecting a 0.3% and 0.1% drop (respectively) compared to the previous forecast.
Gita Gopinath, Economic Counsellor and Director of the Research Department at the IMF, said that the revision for global growth this year reflects “negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies.”
Growth is expected to improve between 2019 and 2020, but Gopinath noted that this is “subject to high uncertainty” as it relies on improved growth performance in stressed emerging market and developing economies.
The IMF cut its forecast for growth in global trade by 0.9 percentage point to 2.5% in 2019. It expects trade to rebound and grow by 3.7% in 2020, approximately 0.2 percentage point less than previously forecast.
“Global growth is sluggish and precarious, but it does not have to be this way because some of this is self-inflicted,” Gopinath said.
She added: “Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent US-China trade truce, technology tensions have erupted threatening global technology supply chains, and the prospects of a no-deal Brexit have increased.”
