The International Monetary Fund's new director, Kristalina Georgieva, has estimated that the ongoing trade dispute between China and the United States could cost the global economy a whopping $700 billion by 2020. The IMF's chief issued the statement during her maiden speech on Tuesday as she takes over former IMF managing director Christine Lagarde.
In her opening address to the annual IMF World Bank meeting in Washington, Georgieva stated that the organization had warned that a trade dispute could severely damage the global economy.
She also stated that the ongoing trade dispute between the world's two largest economies is taking a toll on the global economy and could slow down the world's total gross domestic product by as much as 0.8 percent.
Georgieva stated that the IMF's global growth forecast for 2019 is at its lowest rates since 2010. The exact details of her claim will be published in the organization's updated economic forecasts, which will be released next week. The IMF organization includes 189 countries from all over the world.
The IMF has already downgraded its global growth outlook for the fifth time since October of last year. Back in July, the IMF forecasted a possible 3.2 percent growth in the global economy and 3.5 percent by 2020.
The organization's new director also warned that the major global downturn is likely on the horizon if the dispute continues. This could apparently drive corporate debt at risk of default to over $19 trillion, or 40 percent of the total debt of the world's top eight largest economies. If this happens, the rate could be above the figure recorded during the global financial crisis more than ten years ago.
Apart from the gloomy forecast, Georgieva also urged global central banks to focus more on using their fiscal firepower instead of depending on lowering interest rates.
She warned that interest rate cuts may provide additional finances, but it will not work everywhere.
Based on its latest analysis, the IMF has apparently seen a synchronized slowdown of the global economy and there is apparently no sign that it will improve anytime soon.
The impact of the ongoing disputes between the world's largest economies will apparently soon trickle down to other countries, partly thanks to how interconnected economies have become.
Georgieva predicts that the slowdown could impact nearly 90 percent of the world's economies by the end of the year. Some of the solutions that were brought forward by the new IMF director included a call for global economies to immediately address concerns related to their trade practices. These included reducing trade subsidies, eliminating forced technology transfers, and bolstering protections for intellectual property rights.