IMF cuts global growth forecast amid trade tensions and no-deal Brexit

THE International Monetary Fund (IMF) has cut its growth forecasts for the global economy for this year and next

24 July 2019 - 19:00

THE International Monetary Fund (IMF) has cut its growth forecasts for the global economy for this year and next.

It predicts growth of 3.2 per cent in 2019, down from its April forecast of 3.3 per cent. Growth next year is set to pick up to 3.5 per cent next year, down from its earlier forecast of 3.6 per cent.

Growth 'remains subdued', the IMF says, and there is an urgent need to reduce trade and technology tensions.

The Fund has raised its growth forecast for the UK this year to 1.3 per cent from 1.2 per cent. The report said the revision for the UK reflects a stronger-than-expected first three months of the year, boosted by pre-Brexit stockpiling.

Next year, the report predicts 1.4 per cent growth in the UK based on an assumption of an orderly Brexit followed by a gradual transition to the new regime. As the report notes, what this will be remains highly uncertain, according to the BBC.

The IMF named a no-deal Brexit as one of the key risks to global economic growth.

The Fund also said: 'The principal risk factor to the global economy is that adverse developments - including further US-China tariffs, US auto tariffs, or a no-deal Brexit - sap confidence, weaken investment, dislocate global supply chains, and severely slow global growth below the baseline.'

IMF's chief economist, Gita Gopinath, said in an interview that 'global growth is sluggish and precarious. But it doesn't have to be this way because some of this is self-inflicted'.

The report is, by implication, strongly critical of US President Donald Trump's approach to trade policy. It says countries should not use tariffs - taxes on traded goods - to target bilateral trade balances, or as a substitute for dialogue to pressure others for reform.

The IMF also calls for the uncertainty surrounding trade agreements to be resolved quickly, including Brexit and the free-trade area encompassing the US, Canada and Mexico.

The IMF predicts that the US economy will see a significant slowdown as the stimulus from tax cuts fades. After 2.9 per cent growth last year, it predicts 1.9 per cent in 2020.

The largest forecast downgrades were in some of the major emerging economies, including Brazil where there is uncertainty about pension and other reforms, and South Africa, which is affected by strikes, energy supply problems and weak agricultural production.

There was also a smaller forecast downgrade for both years for China which partly reflects the trade tension with the US.


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