IMF Economic Outlook: Trade war dims prospects as Trump squares up for new EU battle

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01:51

The International Monetary Fund has reduced its original forecast for this year's global economy. The IMF says many downside risks persist, including a looming trade battle between the US and European Union. Our correspondent Owen Fairclough has the story.

This time last year, the International Monetary Fund revised its growth forecast upward, such was its confidence in the global economy. But not anymore.

GITA GOPINATH IMF CHIEF ECONOMIST "With this weakness expected to persist into the first half of 2019, our new world economic outlook projects a slowdown in growth in 2019 for 70 percent of the global economy."

The IMF is so discouraged, it's reduced its original forecast of nearly 4 percent growth for this year to 3.3 percent. So what went wrong?

A U.S. - China trade war that led to a substantial drop in Chinese exports to the U.S. was a big factor. Between them, these countries drive more than a third of global economic output.

The IMF thinks less developed economies such as Turkey and Argentina will help growth pick up, but not without multiple caveats.

GITA GOPINATH IMF CHIEF ECONOMIST "There are many downside risks. Tensions in trade policy could flare up again and play out in other areas such as the auto sector, with large disruptions to global supply chains; growth in systemic countries areas like the euro area and China could surprise on the downside; and the risks surrounding Brexit remain heightened."

Heightened and time critical as the UK races against the clock to negotiate an extension to its Brexit negotiations so it can avoid crashing out of the European Union on April 12th. OFA, CGTN.