The International Monetary Fund (IMF) said Monday that global growth is projected at 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percentage points below
last October's predictions.
"The downward revisions are modest; however, we believe the risks to more significant downward corrections are rising. While financial markets in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth," the international organization explained.
"We have revised downwards our forecasts for advanced economies slightly, mainly due to downward revisions for the euro area," it added.
According to the institution, the U.S. expansion continues, but the forecast remains for a deceleration with the unwinding of fiscal stimulus.
"Across advanced economies, we foresee growth to slow from 2.3% in 2018 to 2% in 2019 and 1.7 percent in 2020," the fund affirmed.
"This softening growth momentum has provided little lift to inflation. While core inflation is close to target in the United States where growth is above trend, it remains significantly below target in the euro area and Japan," it added.
Emerging economies
The IMF projected that economic activity in emerging and developing economies will tick down to 4.5% in 2019, with a rebound to 4.9% in 2020.
"The projection for 2019 has been lowered (0.2 percentage point) from October mainly because of a large projected contraction in Turkey, amid policy tightening and adjustment to more restrictive external financing conditions," it stated.
According to the international organization, China's growth slowdown could be faster than expected especially if trade tensions continue, and this can trigger abrupt sell-offs in financial and commodity markets, as was the case in 2015–16.
"In Europe, the Brexit cliffhanger continues, and the costly spillovers between sovereign and financial risk in Italy remain a threat. In the United States, a protracted US federal government shutdown poses downside risks," it said.
The IMF indicates that economic growth in Latin America is projected to pick up in the following two years, from 1.1% in 2018 to 2% in 2019 and 2.5% in 2020 (0.2 percentage points lower than expected in both years).
(END) CNA/RMB/MVB
Published: 1/21/2019