GROWTH WARNING
IMF sounds alarm on no-deal Brexit as it cuts forecasts
THE International Monetary Fund hit out at “self-inflicted” threats to the global economy today as it cut growth forecasts.
The global body fired shots at US President Donald Trump over the impact of trade wars and his row with Chinese telecoms firms Huawei, and also stressed the potential damage of a no-deal Brexit in the latest update to its World Economic Outlook.
The IMF now expects the world economy to advance 3.2% this year — down from 3.3% in its April forecasts. Risks are “mainly to the downside” in a climate of weak demand and “soft” global trade with a feebler performance from emerging economies like China, India and Brazil driving the downgrade. For the UK, it edged up its 2019 forecasts to 1.3% but put the slight improvement down to pre-Brexit stockpiling. “This is likely to be partially offset by payback over the remainder of the year,” it added.
The IMF flagged up a no-deal as one of the principal risk factors which could “sap confidence, weaken investment, dislocate global supply chains and severely slow global growth”. But it also delivered a harsh verdict on the potential cost of tariffs between the US and China, which it estimates could knock as much as 0.5% off global output next year despite a recent cooling in tensions. Trade growth meanwhile slowed to 0.5% in the first three months of 2019, the weakest pace since 2012. In an scarcely veiled attack on Trump the report added: “It is essential that tariffs are not used to target bilateral trade balances or as a generalpurpose tool to tackle international disagreements.”
The IMF’s chief economist Gita Gopinath warned: “Global growth is sluggish and precarious, but it does not have to be this way as some of this is self-inflicted. Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent USChina trade truce, technology tensions have erupted threatening global technology supply chains, and the prospects of a no-deal Brexit have increased.”
The darkening global outlook comes as Boris Johnson is poised to become Prime Minister with a pledge to take the UK out of the EU with or without a deal. The National Institute for Economic and Social Research said this week there was one in four chance that the UK was already in recession thanks to Brexit paralysis.