IMF lowers global growth forecast to 3% in 2019

Growth in the global economy is expected to reach 3.0% in 2019, its lowest level since 2008-09, the International Monetary Fund (IMF) said, which has seen a significant slowdown in manufacturing activity and uncertainties due to increased commercial and geopolitical tensions.

In its latest semi-annual report "World Economic Outlook," released on Tuesday, the IMF revised down 0.3 percentage point its forecast for 2019 set last April, noting that after slowing sharply For the last three quarters of 2018, the pace of global economic activity remains weak.

The sluggish growth is due to a sharp deterioration in manufacturing and global trade, with higher tariffs and prolonged uncertainty about trade policy, detrimental to investment and the demand for capital goods. In addition, the auto industry is also shrinking due to various factors, such as disruptions due to new emission standards in the eurozone and China that have had lasting effects, says the Chief Economist of the IMF, Gita Gita Gopinath, noting that, overall, the growth in trade volume in the first half of 2019 has fallen to 1%, the lowest level since 2012.

In contrast to the weakness of manufacturing and trade, the services sector continues to maintain itself almost everywhere in the world. This has allowed the labor market to remain buoyant with healthy wage growth and consumer spending in advanced economies, she notes, however, showing signs of a slowdown in the US services sector and in the US. the euro zone.

Increased geopolitical trade tensions have heightened uncertainty about the future of the global trading system and international cooperation in general, undermining business confidence, investment decisions and global trade, the Bretton Woods.

A significant move towards a more accommodative monetary policy – through action and communication – has mitigated the impact of these tensions on the climate and the activity of financial markets, while a generally resilient service sector has supported growth. the IMF, citing "precarious" prospects.

As a result, growth is expected to reach 3.4% in 2020 (a 0.2 point downward revision from the April forecast), mainly reflecting the expected improvement in economic performance in several emerging markets in Latin America, Middle East and Emerging and Developing Europe that are under macroeconomic stress.

However, given the uncertainties over the outlook for many of these countries, the expected slowdown in China and the United States, and significant downside risks, a much slower pace of global activity could materialize, the agency said.

To prevent such an outcome, the IMF recommends that policies be designed to defuse trade tensions, revitalize multilateral cooperation and provide timely support for economic activity, where appropriate. To build resilience, policymakers should address financial vulnerabilities that pose risks to growth over the medium term, the fund adds.

At the multilateral level, countries must resolve their trade disputes in a cooperative manner and eliminate the recently imposed distortion tariffs. Reducing greenhouse gas emissions and limiting the consequences of rising temperatures and devastating weather events are urgent global imperatives, says the IMF.

Higher carbon pricing should be the centerpiece of this effort, complemented by efforts to promote the provision of low-carbon energy and the development and adoption of green technologies.

At the national level, macroeconomic policies should seek to stabilize activity and strengthen the foundations for continued recovery or growth. Adequate monetary policy remains appropriate to support demand and employment and to avoid a slowdown in inflation expectations.

While the resulting easier financial conditions could also contribute to strengthening financial vulnerabilities, it will be essential to put in place stronger macro-prudential policies and a cautious approach to supervision to strengthen balance sheet strength and limit systemic risks. concludes the institution.

LNT with MAP