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IMF lowers global growth forecast, warns of trade, geopolitical tensions

Updated:2019-10-17 10:12:30   XinHua

In its newly-released World Economic Outlook (WEO) report, the International Monetary Fund (IMF) on Tuesday lowered its global growth forecast for 2019 to 3 percent, warning that growth continues to be weakened by rising trade barriers and growing geopolitical tensions.

Noting that this is the slowest pace since the global financial crisis, IMF chief economist Gita Gopinath told reporters that "there is no room for policy mistakes."

International Monetary Fund (IMF) chief economist Gita Gopinath (2nd L) attends a press conference in Washington D.C., the United States, Oct. 15, 2019. (Xinhua/Liu Jie)

The 3-percent global growth projection for 2019 is down 0.2 percentage point from the IMF's estimation in July, while the growth projection for 2020 was also lowered to 3.4 percent, down 0.1 percentage point from the earlier estimation.

Previously, the July WEO report already downgraded growth forecasts for 2019 and 2020, each down 0.1 percentage point from the estimation in April.

"The weakness in growth is driven by a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods," Gopinath said during a press conference at the global lender's headquarters.

Mark Sobel, U.S. chairman of the Official Monetary and Financial Institutions Forum, an independent think tank, wrote in a blog that manufacturing activity is declining in major advanced economies, "in no small part" due to the U.S. administration's "ill-advised trade wars," which may reduce global GDP by up to 1 percent.

According to the estimation by the IMF, overall trade volume growth in the first half of 2019 has fallen to 1 percent, the weakest level since 2012.
"Growth is also being weighed down by country-specific factors in several emerging market economies, and structural forces such as low productivity growth and aging demographics in advanced economies," Gopinath said at the press conference.

Growth in emerging market and developing economies has been revised down to 3.9 percent for 2019, compared to 4.5 percent last year, the report showed. Advanced economies continue to slow toward their long-term potential, with growth downgraded to 1.7 percent this year, compared to 2.3 percent in 2018.

TRADE TENSIONS' IMPACTS

The U.S.-China trade conflict has not only increased direct costs on businesses and consumers, but also caused "secondary effects," such as the loss of confidence and market reactions, said Kristalina Georgieva, the new IMF managing director, in a recent speech.

After holding a new round of high-level economic and trade consultations last week in Washington, China and the United States have achieved substantial progress in multiple areas, sparking cautious optimism for a possible trade agreement between the world's two largest economies.

"We look forward to more details on the recent tentative deal reached between China and the United States. We welcome any steps to de-escalate tensions and to roll back recent trade measures, particularly if they can provide a path towards a comprehensive and lasting deal," Gopinath said.

Craig Allen, president of the U.S.-China Business Council, told Xinhua in a recent interview that he remains optimistic that the two sides will eventually reach a trade agreement.

"Both countries realize that this (trade war) had a negative impact. So that's a good starting point for the agreement," he said.

Keywords:   IMF forecast