Slowdowns in growth are expected for 70% of global economies this year amid widespread political and financial stresses, with a projected rebound next year predicated on a “precarious” emerging market recovery, according to the International Monetary Fund (IMF) on Tuesday.
Global GDP is expected to expand by 3.3% this year according to the IMF’s latest World Economic Outlook compared to expectations of 3.5% in January, amid credit tightening and tensions between the US and China, automotive sector slowdown in Germany, and financial tensions in Argentina and Turkey.
The agency marked down economic growth projections for countries across most regions of the world, including the UK, US, eurozone, Latin America, Canada and Australia.
Weakness that first became apparent in the second half of 2018 is expected to persist through the first six months of 2019, but tailwinds could pick up in the second half of the year due to dovish central bank policies across the western world and hopes of a detente between the US and China.
The IMF left its 2020 outlook unchanged at 3.6% global GDP growth on hopes of a pick-up in economic momentum for developing markets, based on improved conditions in Argentina and Turkey.
This projected growth comes despite slower western growth, as the fading impact of the US fiscal stimulus offsets an expected improvement in the eurozone, and remains fragile.
If the US and China fail to come to an agreement on trade, or if recoveries are slower than expected in a number of emerging market economies, the 2020 rebound may not materialise, according to Gita Gopinath, director of the IMF’s research department.
“This is a delicate moment for the global economy,” she said. “If the downside risks do not materialise and the policy support put in place is effective, global growth should rebound.”
“If, however, any of the major risks materialise, then the expected recoveries in stressed economies, export-dependent economies, and highly-indebted economies may be derailed,” she added.
In the event of a slower-than-expected emerging market recovery, it may be down to policymakers to adapt to the challenge through fiscal stimulus and accommodative monetary policy, the IMF added. - ICIS -