The global economy is experiencing a "synchronized slowdown," the new head of the International Monetary Fund (IMF) said on Tuesday, warning that it would worsen if governments failed to resolve trade conflicts and support growth.

At an event at the global lender's headquarters ahead of the annual meetings of the IMF and the World Bank next week, IMF Managing Director Kristalina Georgieva said trade tensions had "substantially weakened" manufacturing and investment activity worldwide and "there is a serious risk that services and consumption could soon be affected."

Trade tensions could cut global GDP by 700 bln U.S. dollars

Addressing the result of a projected global GDP loss from trade distribute, Gorgieva said it is very clear "everyone loses in a trade war."

"For the global economy, the cumulative effect of trade conflicts could mean a loss of around 700 billion U.S. dollars by 2020, or about 0.8 percent of GDP," the IMF managing director said, previewing new Fund research to be unveiled during IMF and World Bank annual meetings next week.

"In this scenario, the whole economy of Switzerland disappears," Georgieva added.

The research takes into account U.S. President Donald Trump's announcement and planned tariff increases on remaining Chinese imports, or around 300 billion U.S. dollars' worth of goods. Much of the GDP losses will come from a decline of business confidence, productivity losses from broken supply chains and negative market reactions, she said.

"In 2019, we expect slower growth in nearly 90 percent of the world. The global economy is now in a synchronized slowdown. This means that growth this year will fall to its lowest rate since the beginning of the decade," Georgieva said.

The situation is a stark contrast from two years ago, before the U.S.-China trade war started, when countries representing nearly 75 percent of the world's output were seeing accelerating growth, she said.

The Bulgarian economist, a former European Union official who previously held the No. 2 job at the World Bank Group, warned trade growth had "come to a near standstill," and fractures in trade could lead to changes that last a generation, including "broken supply chains, siloed trade sectors, a 'digital Berlin Wall' that forces countries to choose between technology systems."

Low rates encouraged but should apply with caution

If a synchronized slowdown in world economies worsens, she said, the world may need a "synchronized policy response" along the lines of stimulus efforts enacted during the 2008-2009 financial crisis.

Georgieva called for central banks around the world to maintain low rates where appropriate, but warned that this could prompt excessive credit growth and risky investments in the search for better yields, leading to increased financial vulnerabilities.

"Our new analysis shows that if a major downturn occurs, corporate debt at risk of default would rise to 19 trillion U.S. dollars, or nearly 40 percent of the total debt in eight major economies," she said. "This is above the levels seen during the financial crisis."

She called on Germany, the Netherlands and South Korea to increase fiscal spending to support growth, but said such spending was not appropriate for all countries since public debt remained near record levels.

Read more: Bulgarian economist Kristalina Georgieva takes office as IMF chief

(With input from Reuters, Xinhua)