The International Monetary Fund downgraded its economic growth forecast on Tuesday, saying the outlook remains “precarious” amid “rising trade and geopolitical tensions.”

In the latest half-yearly World Economic Outlook, the IMF said it expected global growth to be 3% in 2019 — the slowest pace since the 2008-2009 financial crisis and a 0.3 percentage point cut from its April forecast. The world economy grew 3.6% last year.

Growth is projected to increase to 3.4% in 2020, a 0.2 percentage point downward revision from April, reflecting an expected improvement in economic performance in a number of emerging markets.

But the IMF warned that “with uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize” next year.

The Fund’s chief economist, Gita Gopinath, attributed subdued growth to “rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and ageing demographics in advanced economies.”

According to the IMF, announced tariffs would reduce global economic output by 0.8% by 2020. If tariffs due to come into effect this month and in December were scrapped, the damage to the global economy would be closer to 0.6%.

The Fund’s chief economist, Gita Gopinath, attributed subdued growth to “rising trade barriers; elevated uncertainty surrounding trade and geopolitics; idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and ageing demographics in advanced economies.”

“Further escalation of trade tensions and associated increases in policy uncertainty could weaken growth relative to the baseline projection,” the IMF said.

Amid slowing growth, the U.S. and other advanced and emerging market economies have shifted toward increased monetary policy accommodation, with the Federal Reserve cutting interest rates twice this year.

The IMF called that shift a “counterbalancing force” but said that “Across all economies, the priority is to take actions that boost potential output growth, improve inclusiveness, and strengthen resilience.”

“The forecasts set a gloomy backdrop for the IMF and World Bank annual meetings this week in Washington, where the Fund’s new managing director, Kristalina Georgieva, is inheriting a range of problems, from stagnating trade to political backlash in some emerging market countries struggling with IMF-mandated austerity programs,” Reuters reported.

OLIVIER DOULIERY/AFP via Getty Images

, , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *