International Monetary Fund cuts global growth forecast to joint lowest level since crisis

Mae Love
April 10, 2019

But oil prices have been stabilizing since February this year. In 2012 the International Monetary Fund also projected a 9 per cent growth rate for Ghana.

In 2017 and 2018, though, commodity and crude oil prices edged higher, resulting in a cumulative drag of 2.3 percent of GDP on India's growth.

The IMF said the US-China trade war and a potentially disorderly British exit from the European Union are key risks to the global economy.

Global growth is then forecast to rise to 3.6 per cent in 2020, and plateau at 3.6 per cent in the medium term - "sustained by the increase in the relative size of economies, such as those of China and India, which are projected to have robust growth by comparison to slower growing advanced and emerging market economies", the Washington-based lender said in its latest World Economic Outlook.

The projected growth rate for next year was unchanged at 3.6 percent.

"The projection is 0.3 percentage point and 0.2 percentage point lower for 2019 and 2020, respectively, than in the October 2018 WEO, reflecting downward revisions for Angola and Nigeria with the softening of oil prices". While the improvement in financial markets has been rapid, those in the real economy have been slow to materialize.

There were signs that the slowdown in the global economy was also weighing on Britain's economy.

The EU's economic growth is already slowing substantially, though the International Monetary Fund said it still expects the slowdown in Europe and some emerging market economies will give way to a re-acceleration in growth during the second half of 2019. The recovery, however, is seen as "precarious and predicated on a rebound in emerging market and developing economies where growth is projected to increase from 4.4 per cent in 2019 to 4.8 per cent in 2020".

Rob Kent-Smith, the head of GDP at the ONS, said: "GDP growth remained modest in the latest three months". The growth pace also compares to 2018's 6.2% expansion.

USD/JPY was falling before the data but sank further afterwards to hit an 8-day low of 111.03.

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The IMF also cautioned growth in China "may surprise on the downside" and that the risks from Brexit "remain heightened".

The Fund said continued implementation of structural and financial sector reforms with efforts to reduce public debt remain essential to secure the economy's growth prospects.

Other suggestions for India in the outlook include improving the governance of public sector banks; reforms to hiring and dismissal regulations to incentivise job creation and absorb the country's large demographic dividend; and land reform to facilitate and expedite infrastructure development.

Gopinath also warned of the need for countries to "avoid costly policy mistakes".

"It's very important that policymakers do no harm and work cooperatively", said Gopinath. For monetary policy, it's to stay tight for some more time.

Money, money everywhere and yet more debt!

"Across all economies, the imperative is to take actions that boost potential output and boost inclusiveness and strengthen resilience", said Gopinath.

"There is a need for greater multilateral cooperation to resolve trade conflicts, to address climate change and risks from cybersecurity, and to improve the effectiveness of global taxation", she said.

It blamed the slowdown on the trade spat and tariff hikes between the United States and China, besides "a decline in business confidence, a tightening of financial conditions, and higher policy uncertainty across many economies".

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