Global growth ‘slowest since financial crisis’

THE global economy faces its most serious crisis since the meltdown of the financial system a decade ago, the International Monetary Fund (IMF) has warned.

Output will rise just 3pc this year, down from 3.6pc last year, and a mild recovery in 2020 will largely depend on growth in some emerging markets.

At the core of the slowdown is the US-China trade dispute, with the IMF’s top economist, Gita Gopinath ( pictured), warning that increased tariffs would dent global growth.

In its World economic Outlook, the IMF projected growth of 1.2pc this year and 1.4pc in 2020 for the UK. This would leave Britain lagging only behind the US and Canada in the global output league.

France is almost on a par with the UK but Germany, with 0.5pc expansion this year, is close to recession. Gopinath warns that growth is ‘ not broad-based and precarious.’ She expects the recovery in 2020, if there is one, to be driven by ‘shallower recessions in stressed economies’ including Turkey, Argentina and Iran – all of which face acute geopolitical difficulties. President Donald Trump yesterday poured petrol on the fire by imposing sanctions on Turkey over its campaign against Kurdish militias operating in and around Syria. Gopinath called on countries to invest in social and infrastructure capital and suggested that if growth continued to deteriorate an international fiscal response may be required.

The IMF tone was distinctly bleak with its warning that ‘downside risks have been heightened by geopolitical tensions and Brexit-related risks.’ If the risk is to be reduced, trade barriers would need to be eliminated and geopolitical tensions resolved.

There was a warning that central banks, which have supported the global economy through low interest rates and monetary easing, might have exhausted their firepower, Gopinath cautioned.

She also noted that low interest rates could have a negative impact on financial stability. There has been a build-up of trillions in corporate debt and concern that this could be a source of instability.