The IMF’s new Managing Director Kristalina Georgieva warned of growing rifts in the global economy and urged coordinated action to heal trade divisions Tuesday morning in Washington, DC. (October 8)
She said that the world is facing a slowing of growth largely due to trade tensions, that will only worsen as indirect effects begin to impact economies.
“Two years ago, the global economy was in a synchronized upswing. Measured by GDP, nearly 75 percent of the world was accelerating. Today, even more of the world economy is moving in synch but, unfortunately, this time growth is decelerating. To be precise in 2019, we expect slower growth in nearly 90 percent of the world. In other words, the world economy is now in synchronized slow-down. This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade.”
Bulgarian economist Georgieva, 64-years-old, was giving her first major speech as head of the IMF. She is the second woman to lead the IMF, and the first Managing Director from an emerging market nation in the 75-year history of the Fund.
“So why the slowdown in 2019? There are a range of issues and one common theme across these issues: Fractures,” she told reporters, political leaders and diplomats gathered at the Fund headquarters.
“I will start with trade. We have spoken in the past about the dangers of trade disputes. Now, we see that they are actually taking a toll. Global trade growth has come to almost a standstill,” Georgieva announced.
The IMF has forecast that measures already announced may cut as much as 0.8 percent off the global economy in 2020 alone.
“In part because of the trade tensions, worldwide manufacturing activity and investment have weakened substantially. There is a serious risk that services and consumption could also soon be affected,” she added.
She takes the reins at an uncertain time for the global economy with a landscape of slowing growth and rising trade tensions.
“Even if growth picks-up in 2020, the current rifts could lead to changes that last a generation — broken supply chains, siloed trade sectors, a “digital Berlin Wall” that forces countries to choose between technology systems,” said the former CEO of the World Bank.
“Our goal should be to fix these fractures. Our world is intertwined. So our responses must be coordinated.”
The IMF is expected to unveil its forecast for global growth when it publishes the World Economic Outlook October 15th at the beginning of the Annual Meetings.