IMF projects slow global growth

IMF Managing Director Kristalina Georgieva speaks ahead of the World Economic Forum in Davos, Switzerland. [ Reuters]

Global growth appears to have bottomed out but there is no rebound in sight and risks ranging from trade tensions to climate shocks make the outlook uncertain, a top International Monetary Fund (IMF) official said yesterday.

For 2020 and 2021, the IMF trimmed back its global growth forecasts, mostly due to a sharper-than-expected slowdown in India and other emerging markets, even as it said that a US-China trade deal added to hopes the activity was bottoming out.

With trade wars weighing on exports and investment, the global economy expanded by 2.9 per cent last year, its slowest pace since the global financial crisis, despite near synchronized central bank easing that added half a percentage point to global growth.

“We have not reached a turning point yet,” IMF Managing Director Kristalina Georgieva said told a news conference on the eve of the annual meeting of the World Economic Forum (WEF) in the Swiss ski resort of Davos. “The reality is that global growth remains sluggish.

“Just in the very first weeks of the New Year we have witnessed increased geopolitical tensions in the Middle East and we have seen the dramatic impact that climate shocks could have. We saw them in Australia as well as parts of Africa.” The IMF now sees growth at 3.3 per cent this year, below its October projections for 3.4 per cent and also cut the 2021 forecast to 3.4 per cent from 3.6 per cent.

The reductions reflect the IMF’s reassessment of economic prospects for some major emerging markets, notably India, where domestic demand has slowed more sharply than expected amid a contraction of credit and stress in the non-bank sector.

The IMF also said it marked down growth forecasts for Chile due to social unrest and for Mexico, due to continued weakness in investment.

The Fund said that an easing of tensions between the US and China, which had stunted GDP growth in 2019, had boosted market sentiment, amid “tentative” signs that trade and manufacturing were bottoming out.

The Fund’s cautious outlook assumes that there are no additional flare-ups in US-China trade tensions.