IMF cuts global growth forecast further to 3.3-pct in 2019

Apr 10, 2019 (LBO) – Reflecting the slowdown in production activity in the latter half of 2018 and the first half of 2019, global growth is set to moderate from 3.6 percent in 2018 to 3.3 percent in 2019, and then to return to 3.6 percent in 2020, the IMF said releasing its World Economic Outlook.

The forecast for 2019 is 0.4 percentage points lower than in the October 2018 World Economic Outlook, while the forecast for 2020 is 0.1 percentage point lower.

Industrial production figures and surveys of purchasing managers suggest that the slower momentum in global growth is likely to continue in early 2019 and the World Economic Outlook projects a decline in growth in 2019 for 70 percent of the global economy.

“Although a 3.3 percent global expansion is still reasonable, the outlook for many countries is very challenging, with considerable uncertainties in the short term, especially as advanced economy growth rates converge toward their modest long-term potential,” IMF Economic Counsellor, Gita Gopinath said.

“While 2019 started out on a weak footing, a pickup is expected in the second half of the year. This pickup is supported by significant policy accommodation by major economies, made possible by the absence of inflationary pressures despite closing output gaps.”

The US Federal Reserve, in response to rising global risks, paused interest rate increases and signaled no increases for the rest of the year. The European Central Bank, the Bank of Japan, and the Bank of England have all shifted to a more accommodative stance.

China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US-China trade tensions has improved as the prospects of a trade agreement take shape.

Beyond 2020 growth will stabilize at around 3.5 percent, bolstered mainly by growth in China and India and their increasing weights in world income.

Growth in advanced economies will continue to slow gradually as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group, given ageing trends and low productivity growth.

Growth in emerging market and developing economies will stabilize at around 5 percent; though with a considerable variance between countries as subdued commodity prices and civil strife weaken prospects for some.