IMF has downgraded global growth once again.
Global growth is forecast at 3% for 2019, its lowest level since 2008–09 and a 0.3 percentage-point downgrade from the April 2019 World Economic Outlook.
Growth continues to be weakened by rising trade barriers and increasing geopolitical tensions, IMF noted.
According to the fund, trade volume growth in the first half of 2019 has fallen to 1%, the weakest level since 2012.
“We estimate that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8% by 2020,” said Gita Gopinath, chief economist of IMF .
Growth is also being weighed down by country-specific factors in several emerging market economies, and by structural forces, such as low productivity growth and aging demographics in advanced economies, the fund noted.
For 2020, IMF projects 3.4% of growth, a 0.2 percentage point downgrade from the estimate in April.
However, the recovery is not broad-based and remains precarious, said Gopinath.
The fund estimates improvement in several emerging markets such as Latin America, the Middle East, and emerging and developing Europe that are under macroeconomic strain.
“Yet, with uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize,” the chief economist warned.
To forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed, IMF said.
To strengthen resilience, policymakers should address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal.