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Global growth weakens

Global growth weakens

Because of rising global conflicts, the International Monetary Fund is predicting that the growth of the world economy will hit its lowest since the 2008 financial crisis.

Although seeing a slight rebound in 2020, the IMF’s latest World Economic Outlook warns that threats may arise from the political tensions in the Middle East. It also made mention how the trade tension between the United States and China affect the global economy as a whole.

The World Bank in partnership with the 189-nation IMF released an updated forecast for the fall meetings this week. Aiming to ease the ongoing trade wars, finance ministers and bankers from the world’s 20 biggest economies will gather on Friday.

3% global growth this year is what the new forecast reflects. It is slightly down from July’s numbers as well as last year’s 3.6% 2018 statistics. Meanwhile for the United States, a 2.4% increase is being forecasted, slightly lower than last year’s 2.9%.

In 2020 the IMF forsees a recovery for the world economy but a curb for the United States in contrast to the 3% growth that the Trump administration projects. IMF economists warned the possibility of these projected gains to be unrealized.

IMF’s chief economist implied that with the current slow down and uncertain recovery, there is no room for policy mistakes. Moreover, he said that there will be an urgent need for policy makers to move as one to get rid of trade and geopolitical tensions.

Economies which significantly slowed down this year is expected to recover next year as in the case of India, Mexico, Russia and Saudi Arabia.

Trade disputes have largely contributed to the slow down of economies resulting to higher tariffs being imposed on many goods. This year’s first half, dropped to 1%, the weakest annual pace since 2012.

Kristalina Georgieva, successor of Christine Lagarde will preside over her first IMF meeting as managing director has exclaimed how various trade disputes could cause a loss as huge as US$700 billion by the end of next year. This is amidst the efforts of the Federal Reserve and other central banks to lower interest rates and deploy other means to stack up economies.

By 2020, global growth would have been about one-half percentage point lower this year without the bank’s effort to lighten borrowing rates.

Another vital occurrence is the potentially upsetting exit by Britain from the European Union by the end of October plus the existence of other trade and geopolitical risks. IMF envisions both situations as a threat to the economy.

Germany’s economy is expected to be a modest 0.5 % this year before rising to 1.2 % next year. For Japan, the IMF expects growth of just 0.5%. It foresees an expansion in Russia of 1.9% up from 1.1 % this year.

Meanwhile, China’s growth is projected to decrease to 6.1% this year and 5.8% next year, the lowest rate since 1990.


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