IMF cuts global growth outlook over US-China trade worries

The International Monetary Fund has cut its global growth forecast for 2019 and 2020, ahead of the World Economic Forum in Davos

Christine Lagarde IMF global growth otulook Source: Bloomberg

In its world economic outlook report released on Monday, the IMF has downgraded forecasts, predicting the global economy will grow 3.5% in 2019 and 3.6% in 2020, down 0.2% and 0.1 % from last October’s forecasts.

The grim outlook brings to light growing concerns over US-China trade war tensions and the potential crisis that could happen over Brexit.

IMF managing director Christine Lagarde said, ‘After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising.’

She urged policymakers to brace for a “serious slowdown."

The forecast downgrade also reflects weaknesses in Europe, as Germany’s troubles over new fuel emission standards for cars start to grow, while Rome’s recent budget standoff with the EU begins to weigh in.

China-US trade war worries

Global slowdown worries have put markets in a state of uncertainty for some time, forcing the Federal Reserve Bank to pause its interest rate hike, with investors cautious of rising Sino-US trade tensions.

The IMF also took into consideration weak Chinese data released on Monday, pointing to a Chinese economic slowdown in the fourth quarter, draggd down by lingering US tariffs.

The IMF cut its growth forecasts for the eurozone while keeping its prediction for a 2.5% expansion in the US in 2019.

China’s growth forecast was kept at 6.2 % in both 2019 and 2020, but the IMF said economic activity could miss expectations if trade tensions persist.

‘As seen in 2015–16, concerns about the health of China's economy can trigger abrupt, wide-reaching sell-offs in financial and commodity markets that place its trading partners, commodity exporters, and other emerging markets under pressure,’ The IMF said in a statement.

The IMF said Britain is expected to attain 1.5% growth in 2019, based on the assumption of an orderly exit from the EU.

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