IMF slashes global growth forecast amid trade war and rate rise fears
THE International Monetary Fund (IMF) has said the world economy is plateauing as it cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.
On the eve of its annual meetings in Bali, Indonesia, it projected a global expansion of 3.7pc this year and next, down from the 3.9pc forecast three months ago. It was the first downgrade since July 2016. While the global economy is still on track to match last year’s pace, which was the strongest since 2011, the new outlook suggests fatigue is setting in and the overall performance masked divergence with mounting weakness in emerging markets from Brazil to Turkey.
The fund left its 2018 US forecast unchanged but cut next year’s, citing the impact of the trade conflict.
Risks to the global outlook have risen in the last three months and tilt to the downside, the IMF said. Threats include a further inflaming of the trade war between the US and countries including China, and a sharper-than-expected rise in interest rates, which would accelerate capital flight from emerging markets.
“There are clouds on the horizon. Growth has proven to be less balanced than we had hoped,” said IMF chief economist Maurice Obstfeld. “Not only have some downside risks we identified in the last WEO been realised, the likelihood of further negative shocks to our growth forecast has risen.”
The warning comes as finance ministers and central bankers from the IMF’s 189 member nations prepare for the annual meetings of the fund and the World Bank.