Daily Management Review

IMF Report Says Delicate Moment Being Faced By World Economy


IMF Report Says Delicate Moment Being Faced By World Economy
The world economy is a "delicate moment" according to the chief economist of the International Monetary Fund Gita Gopinath. While a global recession is not being predicted by Gopinath, she said that "there are many downside risks".
According to the regular assessment of the World Economic Outlook released by the IMF, the world body is forecasting a global growth of about 3.3% for the current year and 3.6% in the next year. Those numbers would be lower than the growth recorded while the latest 2019 forecast is a downgrade of the previous estimate of the IMF itself.
There is a wide spread of the 0.2% decline in forecast global growth according to the IMF.
Those developed economies affected by in the downgrade include the US, the UK and the eurozone.
Growth forecast for the UK economy is pegged at 1.2% for 2019 which is 0.3% lower than the January forecast for the same by the IMF. Growth in 2020 has also been revised down. A major role in the downgrade is played by Germany and Italy, which is already in recession. Weaker performance is also projected for the Latin American economies according to the IMF which also predicted slow growth in the Middle East and North Africa.
The revision was small for China – for which the IMF did an upward revision for the current year while a down grade for next year. The IMF expects the continuation of the slowdown in the Chinese economy.
A slowdown in the global economy in the latter part of 2018 was reflected in the weakness exhibited by the IMF forecast which is also expected to continue in the first half of this year. The IMF expects that there would be an uptick in growth after that and the momentum would also continue into next year.
Bur the recovery was described to be "precarious" by Gopinath. The recovery of growth in a number of developing economies which are currently under stress, specifically Turkey and Argentina, would be among the determinants of the recovery, she said. A partial recovery in the eurozone is also expected by Gopinath.
The IMF however expects a further slowdown in the US economy with growth remaining slightly lower than 2% for the next year because of the waning down of the impact of the tax cuts announced in 2017 by US president Donald Trump. There was however no indication in the blog of Gopinath or in the IMF's report that showed any sympathy towards the argument of Trump that the sluggishness of the US economy is primarily because of increase in rate hikes by the US Federal Reserve.
The downwards risk factors highlighted by Gopinath were nothing new.
The possibility of the flaring up of global trade tensions once again and spreading to new areas is the first concern. Gopinath referred to the car industry in particular which is business field on which Trump is contemplating imposition of import tariffs. Risks associated iwht Brexit is also mentioned by her. The chances of a deterioration in financial markets, leading to higher borrowing costs, including for governments was among the other risks mentioned by her.