IMF Cuts 2019 Global Growth Outlook For 3rd Time; Says Risks On The Rise

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IMF seal (Photo: Reuters)

The world economy will remain in the doldrums this year, with the International Monetary Fund (IMF) slashing its global economic growth forecast for the third time in six months.  

It now expects the world economy to grow by only 3.3 percent compared to the previous outlook of 3.5 percent, which was also a downgrade. It is the lowest annual growth outlook since the Great Recession of 2008.

The IMF cited worsening risks like trade wars and tighter monetary policy by the U.S. Federal Reserve for its gloomy outlook. "The balance of risks remains skewed to the downside," said the IMF. "Failure to resolve differences and a resulting increase in tariff barriers above and beyond what is incorporated into the forecast would lead to higher costs of imported intermediate and capital goods and higher final goods prices for consumers."

A hint of good news: the IMF expects the world economy to expand by 3.6 percent in 2020.

It projects a growth rate for advanced economies to hit 1.8 percent in 2019 and 1.7 percent in 2020. Both estimates are lower than the 2 percent-plus rates recorded in the previous two years.

For emerging market and developing economies, the IMF lowered its projections to 4.4 percent for 2019, or 0.1 percent lower than 2018.

IMF chief economist Gita Gopinath said the projected slowdown in 2019 is "broad-based."

"It reflects negative revisions for several major economies including the euro area, Latin America, the United States, the United Kingdom, Canada, and Australia," she said.

The loss of growth momentum dates back to the second half of 2018 when the world economy was hit by "a significantly weakened global expansion," according to Gopinath. Global growth remained strong at 3.8 percent in the first half of 2018 but dropped to 3.2 percent in the second half.

Other key highlights of the IMF projections released Tuesday:

  • Risks to the downside based on Brexit and U.S.-China talks.
  • Cuts Euro-zone growth to 1.3% from 1.6%.
  • Cuts U.S. growth forecast to 2.3% from 2.5%.
  • Says Growth will stabilize in the first half of 2019. Sees gradual recovery afterward.
  • Raises 2020 U.S growth forecast to 1.9% from 1.8%.
  • Raises 2019 China growth forecast to 6.3% from 6.2%.
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