IMF downgrades outlook for world economy, citing trade wars

WASHINGTON (AP) – The International Monetary Fund (IMF) is further downgrading its outlook for the world economy, predicting that growth this year will be the weakest since the 2008 financial crisis primarily because of widening global conflicts.

The IMF’s latest World Economic Outlook foresees a slight rebound in 2020 but warns of threats ranging from heightened political tensions in the Middle East to the threat that the United States (US) and China will fail to prevent their trade war from escalating.

The updated forecast released yesterday was prepared for the fall meetings this week of the 189-nation IMF and its sister lending organisation, the World Bank.

Those meetings and a gathering on Friday of finance ministers and central bankers of the world’s 20 biggest economies are expected to be dominated by efforts to de-escalate trade wars.

The new forecast predicts global growth of three per cent this year, down 0.2 percentage point from its previous forecast in July and sharply below the 3.6 per cent growth of 2018.

For the US this year, the IMF projects a modest 2.4 per cent gain, down from 2.9 per cent in 2018.

Next year, the fund foresees a rebound for the world economy to 3.4 per cent growth but a further slowdown in the US to 2.1 per cent, far below the three per cent growth the Trump administration projects.

IMF economists cautioned that that even its projected modest gains might not be realised.

“With a synchronised slowdown and uncertain recovery, there is no room for policy mistakes, and an urgent need for policymakers to cooperatively de-escalate trade and geopolitical tensions,” IMF’s Chief Economist Gita Gopinath said in the report.