IMF warns of global economic slowdown
The head of the International Monetary Fund has sounded the alarm over the global economy, warning of an economic slowdown triggered by rising trade protectionism and soaring levels of debt.
Christine Lagarde used a speech in Washington on Monday to drop the broadest possible hint that the IMF would cut its global growth forecast when it unveils its latest health check on the world economy next week.
Speaking before the fund’s forthcoming annual meeting – taking place next week on the Indonesian island of Bali – she said: “In July, we projected 3.9% global growth for 2018 and 2019. The outlook has since become less bright, as you will see from our updated forecast next week.”
Lagarde suggested the economic weather had started changing after the last annual meeting in Washington at the end of 2017, when much of the world was experiencing the strongest period for economic growth since the financial crisis.
Although there are still bright spots from falling unemployment and the proportion of the global population living in extreme poverty falling to a record low of less than 10%, she said some risks had begun to materialise. Growing use of trade barriers, such as higher taxes on foreign imports, has already lowered the level of imports and exports, while there has been an impact on business investment and manufacturing output, she said.
“If the current trade disputes were to escalate further, they could deliver a shock to a broader range of emerging and developing economies,” she added.
In a veiled attack on the US, where Donald Trump has slapped higher import tariffs on a range of goods, she said nations “sailing alone” would not help to fix global trade disputes. Lagarde said: “History shows that, while it is tempting to sail alone, countries must resist the siren call of selfsufficiency – because as the Greek legends tell us, that leads to shipwreck.”
Although the US reached a renewed deal last weekend on trade with Canada and Mexico, in a potential boost to the regional economy, risks to the global economy remain from a dispute between the US and China.
Lagarde also sounded the alarm over financial stability, where the total value of global debt has rocketed by 60% in the decade since the financial crisis to reach an all-time high point of $182tn.