FURTHER DOWNGRADE

The IMF predicts that global growth this year will be the weakest since the 2008 crisis.

WASHINGTON: The International Monetary Fund is further downgrading its outlook for the world economy, predicting that growth this year will be the weakest since the 2008 financial crisis, primarily because of widening global conflicts.

The IMF’s latest World Economic Outlook released on Tuesday foresees a slight rebound in 2020 but warns of threats ranging from heightened political tensions in the Middle East to the threat that the United States and China will fail to prevent their trade war from escalating.

The updated forecast was prepared for the meetings this week of the 189nation IMF and its sister lending organisation, the World Bank.

Those meetings and a gathering on Friday of finance ministers and central bankers of the world’s 20 biggest economies are expected to be dominated by efforts to de-escalate trade wars.

The new forecast predicts global growth of 3% this year, down 0.2 percentage point from its previous forecast in July and sharply below the 3.6% growth of 2018. It would be the weakest year since global growth was a negative 0.1% in 2009 as the global economy struggled with the shockwaves from the 2008 financial crisis.

For the United States this year, the IMF projects a modest 2.4% gain, down from 2.9% in 2018.

Next year, the fund foresees a rebound for the world economy to 3.4% growth but a further slowdown in the US to 2.1%, far below the 3% growth the Trump administration projects.

The IMF’s forecast predicted that about half the increase in growth expected next year will result from recoveries in countries where economies slowed significantly this year, as in Mexico, India, Russia and Saudi Arabia.

The global economy will also get a boost from recoveries or at least more shallow recessions in various stressed emerging market economies such as Turkey, Argentina and Iran.

The report said that the expected rebound would represent a modest bounceback after steep economic declines this year.

This year’s slowdown, the IMF said, was caused largely by trade disputes, which resulted in higher tariffs being imposed on many goods. Growth in trade in the first half of this year slowed to 1%, the weakest annual pace since 2012.

In addition to trade and geopolitical risks, the IMF envisions threats arising from a potentially disruptive exit by Britain from the European Union on Oct 31.

The IMF projected that growth in the 19-nation euro area will slow to 1.2% this year, after a 1.9% gain in 2018. It expects the pace to recover only slightly to 1.4% next year.

Growth in Germany, Europe’s biggest economy, is expected to be a modest 0.5% this year before rising to 1.2% next year.

China’s growth is projected to dip to 6.1% this year and 5.8% next year. These would be the slowest rates since 1990, when China was hit by sanctions after the brutal crackdown on pro-democracy demonstrators in Beijing’s Tiananmen Square.

For Japan, the IMF expects growth of just 0.5% next year. It foresees an expansion in Russia of 1.9%, up from 1.1% this year.