IMF cuts global growth forecast

The International Monetary Fund (IMF) has again cut its economic growth forecasts for 2019 and 2020.

This is the second downgrade in three months with growth forecast at 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percent point below last October’s projections.

Speaking in Davos, Switzerland, at the World Economic Outlook press conference, the IMF’s managing director, Christine Lagarde, said global growth forecast for 2019 and 2020 had already been revised downward last year, partly because of the negative effects of tariff increases enacted in the United States and China earlier that year.

 “The bottom line is that after two years of strong expansion, the world economy is growing more slowly than expected and risks are rising,” she said. “These risks are now increasingly intertwined - think of how higher tariffs and rising uncertainty over future trade policy fed into lower asset prices and higher market volatility. This in turn contributed to tightening financial conditions, including for advanced economies, which is a major risk factor in a world of high debt burdens.”

Lagarde said this did not mean that a global recession was around the corner, but simply that the risk of a sharper decline in global growth had increased.

“Add to this geopolitical worries and disappointing long-term growth prospects, and you have an economic picture with a clear message: Address remaining vulnerabilities and be ready if a serious slowdown were to materialise.”

She said for most countries this would mean harnessing the existing growth momentum to create more policy room to act.

“The goal is to make economies more resilient and more inclusive, and to increase collaboration,” said Lagarde.

Economic activity in emerging and developing economies has also been revised and is now projected to tick down to 4.5% in 2019, with a rebound to 4.9% in 2020.

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