IMF expects global growth to slow in 2019

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Summary

  • 2019 global economy to increase by 3.5%
  • Growth forecasts cut for the eurozone, including Germany, France, and Italy
  • India and Japan GDP expected to rise this year
  • Brexit, trade tensions top the main risks for the global economy this year

The world economy starts the year 2019 on a weak note. According to the latest quarterly forecasts released by the IMF.

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The IMF cut its growth forecasts for the global economy to just 3.5% in 2019. This marks a downward revision compared to the 3.7% growth estimates in October 2018. This is also down from the July 2018 forecast of3.9%.

The IMF, in its previous projections, had already warned that growth could turn flat. But the latest forecasts now concede the fact that the global economy has weakened considerably since its last quarterly forecasts.

The IMF, however, stated that there are no signs of a global recession but noted that the risk of a sharper decline in the global economy increased considerably. The forecasts came from the IMF’s managing director, Christine Lagarde who spoke to reporters in Davos, Switzerland at the World Economic Forum’s annual meeting.

The IMF chief said that there are significant threats of higher tariffs which have already weakened the financial markets.

The IMF said that part of the declines in the world economy was due to the poor economic performance from the eurozone. The IMG cut Germany’s growth forecasts to 0.6% for this year. It attributed weak consumption and industrial production data.

What about the Eurozone?

Growth in other Eurozone countries such as Italy signals a downgrade. Italy’s GDP decreased by 0.4 percentage points while French GDP slashed 0.1 percentage points. The IMF cited high government borrowing costs in Italy and the social unrest in France as the reasons for affecting productivity.

Growth forecasts for the emerging markets are dim, including countries such as Mexico. Private investment turned weaker and energy-exporting countries already feel the pinch of lower oil prices. In Turkey, the IMF expected growth to contract after the currency crisis last year.

Growth forecasts for India and Japan are on the table.

Despite cutting forecasts for most of the economies, growth figures for the United States and China remained unchanged. The IMF previously projected that the growth in the world’s first and second largest economies would slow by 0.4 percentage points in 2019 compared to the year before.

Investors have been focusing on weakening demand globally in the backdrop of sharp declines in the equity markets, particularly in the final quarter of 2018. The IMF said that there were reasons to worry as far as the global economy was concerned.

The institution noted several risks with the trade tensions topping the list. The IMF said that while it welcomed the recent truce between the two economies, it remained skeptical that the possibility of trade tensions would resurface casting a shadow on the global economic prospects as a result.

Other economies in play

Regarding the instability in the financial markets, the IMF stated that risks could come from the fiscal policies followed by Italy, the U.S. government shutdown and a potentially messy Brexit from the European Union.

The latest forecasts come as the IMF recently appointed a new chief economist. While growth figures do not show a substantial slowdown, the overall pace of growth at 3.5% for 2019 is seen to still be stronger compared to the 3.2% growth rate in 2016.

Despite the slowdown, the global economy would still register an expansion in activity.

The IMF said that the main shared priority for the countries was to resolve the trade disputes amicably and quickly. The IMF said that it expects that Britain will exit the EU with a smooth transition, in line with the growth forecasts for this year.

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