The IMF’s latest World Economic Outlook (WEO) sees the global economy slowing and is urging leaders around the world to address threats to the global economy.
“A year ago, economic activity was accelerating in almost all regions of the world. One year later, much has changed. The escalation of U.S.-China trade tensions, needed credit tightening in China, macroeconomic stress in Argentina and Turkey, disruptions in the auto sector in Germany and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018,” said the Fund’s chief economist Gita Gopinath at the launch of the WEO Tuesday in Washington.
She added that slowing growth is widespread, hitting emerging and advanced economies alike.
“The U.S. economy in our forecast will slow in 2019 and then slow somewhat more in 2020. This is to be expected as the effect of the fiscal stimulus fades. And, so that is one of the important reasons for the decline. At the same time, the more accommodative monetary policy stance is helping with growth in 2020. To your question about monetary policy, we fully endorse the view that any central bank takes a very data-dependent approach which is well communicated.”
Gopinath noted that trade tensions between the U.S. and China weighed down the economy in 2018, but a deal would be welcome and good for growth.
“We will have to wait to see what the specific details are going to be. But, as we’ve said on many occasions, any improvement on trade relations, multilateral cooperation on this front, making sure that there is some sort of a durable resolution of trade uncertainty would all be very positive for global growth.”
She also highlighted the importance of resolving Brexit.
“We have seen the negative consequences of the uncertainty surrounding Brexit, which has weighed on investment in the U.K. and is one of the factors for our downward revision of growth for 2019 for the U.K. We’ve also done our estimates of the-long term impact of a no-deal Brexit, which would mean relapsing to WTO tariff rules, and they are quite substantial, in the order of magnitude of about 6 percent for the U.K. and about half a percent for the EU.”