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IMF Cuts Growth Forecasts Amid ‘Sluggish’ Global Economy

IMF attributes ‘the lion’s share’ of downward revision to ‘more subdued growth forecast’ for India. Asia’s third-largest economy, is expected to grow by 5.8% in 2020, a 1.2 percentage point markdown from the organization’s October forecast.
James Hyerczyk

The International Monetary Fund (IMF) said Monday that the global economic outlook “remains sluggish” as it trimmed its growth forecasts for 2019 and 2020 to 2.9% and 3.3% respectively.

“The projected recovery for global growth remains uncertain. It continues to rely on recoveries in stressed and underperforming emerging market economies, as growth in advanced economies stabilizes at close to current levels,” IMF Chief Economist Gita Gopinath said in a written statement.

Nonetheless, the Fund noted that some of the biggest economic uncertainties, highlighted in October, have dissipated. “Some risks have partially receded with the announcement of a U.S.-China Phase I trade deal and lower likelihood of a no-deal Brexit,” Gopinath said.

In addition, the IMF has said that central banks are expected to keep supporting their respective economies. “Monetary policy has continued to support growth and buoyant financial conditions. With these developments, there are now tentative signs that global growth may be stabilizing, though at subdued levels,” Gopinath also said in the report.

However, the IMF is cautious about the state of the global economy going forward, in particular about further trade tensions. “New trade tensions could emerge between the United States and the European Union, and U.S.-China trade tensions could return,” Gopinath said.

According to Gopinath, further trade tensions “alongside rising geopolitical risks and intensifying social unrest could reverse easy financing conditions, expose financial vulnerabilities, and severely disrupt growth.”

“While there are signs of stabilization, the global outlook remains sluggish and there are no clear signs of a turning point. There is simply no room for complacency, and the world needs stronger multilateral cooperation and national-level policies to support a sustained recovery that benefits all,” she concluded.

IMF Attributes ‘The Lion’s Share’ of Downward Revision to ‘More Subdued Growth Forecast’ for India

India, Asia’s third-largest economy, is expected to grow by 5.8% in 2020, a 1.2 percentage point markdown from the organization’s October forecast.

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China Growth Upgraded

China’s growth forecast for 2020 was revised higher by 0.2 percentage points to 6.0%, according to the IMF. That’s partly because the country’s “phase one” trade deal with the U.S. is likely to reduce some risks facing the world’s second-largest economy, the fund said.

IMF Predicts Modest US Growth

The U.S., the world’s largest economy, is projected to grow by 2.0% this year, a downward revision of 0.1 percentage points compared to the IMF’s October forecast.

IMF Sees Euro Zone Pick Up

Growth in the Euro Zone for this year was revised down by 0.1 percentage points to 1.3%, according to the IMF. However, that projection reflects a pick up from last year’s 1.2% estimate, which the organization attributed to an expected improvement in external demand.

These are the IMF’s growth forecasts for major European economies this year”

  • Germany: 1.1%
  • France: 1.3%
  • Italy: 0.5%
  • Spain: 1.6%.
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