The world’s economy continues to expand, but is losing momentum the IMF reported Monday (January 21) in its latest quarterly update to the World Economic Outlook report.
“Global growth is expanding at a healthy rate, but we are seeing a slowing momentum,” says IMF Head of Research Gita Gopinath.
“We have seen a weakening of the growth rate and we have revised down our estimates both for 2019 and 2020. Now those revisions are moderate, but what we are flagging is that there are many important down-side risks to the global economy,” she added.
Trade tensions and tightening financial conditions in the US and other major economies are the biggest short-term factors in the downward revisions.
Central Banks are generally reining in loose credit environment meant to stimulate the world’s economies after the 2008 global economic crisis, but the combative tone of trade negotiations is now beginning to take a toll on growth the IMF warns.
“A very important one has to do with trade. Trade tensions that we have seen over the past year – the tremendous amount of uncertainty with respect to trade policy going forward – this is a very important down-side risk that we are flagging.”
The IMF is recommending that countries shore up their fiscal balance sheets during this expansion, to better be prepared for a future downturn.
And Gopinath also urged countries to step back from confrontation on trade in order to come up with multilateral, rules-based long term solutions to disputes.
“It’s absolutely crucial for us to turn around the momentum, and policy can really help fix a number of the down-side risks that we have flagged. On the trade side it’s important to come together, to have a cooperative solution that’s permanent and that would be good not just for the US and China, but for the global economy.”