IMF lowers global growth forecast
The International Monetary Fund has further downgraded its expectations for world economic growth to 3 percent for 2019, the slowest pace since the 2008 global financial crisis. Analysts said the Chinese economy has showed resilience amid the global slowdown, with deepening reform and opening-up to refresh growth momentum.
The IMF calls for policymakers to undo trade barriers through durable agreements, rein in geopolitical tensions and reduce domestic policy uncertainty.
“Such actions can help boost confidence and reinvigorate investment, manufacturing and trade,” Gita Gopinath, economic counselor and director of the Research Department at the IMF, said at a news conference on Tuesday.
The forecast and suggestions were made in the quarterly World Economic Outlook update the IMF released at the opening of the annual IMF/World Bank meetings.
She said that global growth continues to be weakened by rising trade barriers and increasing geopolitical tensions. As a result, the IMF forecast for 2019 world economic growth is 0.3 percentage points lower than the April outlook reported.
“At 3 percent growth, there is no room for policy mistakes and an urgent need for policymakers to support growth,” she said.
The outlook trimmed growth projections for both China and the United States, which have been locked since early last year in a trade conflict that is hurting business sentiment globally.
China’s economy is expected to grow at 6.1 percent this year, 0.1 percentage point lower than the July prediction, while the US economy will grow 2.4 percent in 2019, down by 0.2 percentage points compared with the IMF’s July forecast.
The two countries reported “substantial progress” in a new round of trade talks last week in Washington.
“We welcome any step to de-escalate tensions and to roll back recent trade measures, particularly if they can provide a path toward a comprehensive and lasting deal,” Gopinath said.
If all the tariffs enacted by the world’s top two economies in 2018 and 2019 were to be removed, that would boost global GDP by 0.8 percent by the end of 2020, she said.
Tang Jianwei, chief researcher at the Financial Research Center of the Bank of Communications, said the IMF’s downgraded projection was broadly in line with his forecast for China’s growth. Tang said he expected third quarter growth to land at 6.1 percent then for growth to edge down to 6 percent in the fourth quarter.
But with annual growth forecast to come in at above 6 percent, China still stands out among major economies, Tang said. “And as the country deepens reform and opening-up, economic growth will stabilize gradually. A lot of institutional innovations can be made to inject long-term growth momentum.”
Tang cited as an example that China could reform the land system and release more land resources for property development, which would increase housing supplies, curb housing bubbles and guide more investment into the real economy.
In the near term, there is still the space and the necessity to strengthen macroeconomic policy support to counter downside pressure, Tang added.
The IMF has also downgraded its growth projection for the Hong Kong Special Administrative Region, citing “social unrest” as a factor. Hong Kong’s GDP is forecast to grow 0.3 percent for 2019, versus 2.7 percent in the outlook released in April.
In answering a China Daily question regarding the impact of the sharp decline in foreign direct investment, Gian Maria Milesi-Ferretti, deputy director of IMF’s Research Department, said shrinkage of FDI among major economies last year occurred in investment in new facilities and in mergers and acquisitions.
“The potential for increased fragmentation to reduce the efficiency of production, to reduce productivity growth, is there,” he said.
Zhang Tao, IMF deputy managing director, said the global economy is in a synchronized slowdown because slower growth is expected in nearly 90 percent of the world this year.
“However, we do not see recession in our baseline forecast for 2019,” Zhang said. “We project global growth to rise to 3.4 percent in 2020, though this recovery is precarious.”