IMF predicts weakening global expansion

World
Europe

Amid trade tension and high uncertainties, International Monetary Fund (IMF) cut the global economic growth forecasts to 3.5 percent for 2019 and 3.6 percent for 2020, 0.2 and 0.1 percentage point below as compared to last October's projections respectively, according to the World Economic Outlook (WEO) update released on Monday.

The new forecast, released on the resort town of Davos, Switzerland, where the World Economic Forum is opening, shows that the softer momentum in the second half of 2018 is weighing on the economy and the ongoing uncertainty brought new pressure.

The IMF has already revised the global growth for the two years downward in last October partly due to the trade tension between China and the U.S. and now the further cut in part reflects a confluence of factors, including the weakening domestic demand and financial market sentiment in euro zone.

The announcement in 2018's G20 Summit of a 90-day suspension of the U.S.-China tip-for-tat tariff hikes is welcome, but the possibility of tensions resurfacing in the spring casts a shadow over global economic prospects, according to the WEO, which also pointed out high uncertainties in advanced economies.

Concerns over a U.S. government shutdown further weighed on financial sector sentiment toward year-end, but the growth forecast for the U.S. remains unchanged, 2.5 percent growth in 2019 and soften further to 1.8 percent in 2020.

Euro area is set to see its growth moderate from 1.8 percent in 2018 to 1.6 percent in 2019, 0.3 lower than projected last fall, and 1.7 percent in 2020, for the impacts of uncertainties from many countries, such as revised auto emission standards in Germany, financial problem in Italy and street protests in France.

Considering the combined influence of needed financial regulatory tightening and trade tension with the U.S., WEO predicted China's economy would slightly slow to 6.2 percent in 2019 and 2020.

The IMF suggests that the main shared policy priority right now should be countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilizing an already slowing global economy.

Across all economies, measures to boost potential output growth, enhance inclusiveness, and strengthen fiscal and financial buffers in an environment of high debt burdens and tighter financial conditions are imperatives, said the WEO.