Washington: The global economy is in a “synchronised slowdown” amidst growing trade barriers and heightened geopolitical tensions, the International Monetary Fund (IMF) warned on Tuesday as it downgraded the 2019 growth rate to three per cent, the slowest pace since the global financial crisis.
“This is a serious climb down from 3.8 per cent in 2017, when the world was in a synchronised upswing,” Indian-American Gita Gopinath, chief economist of the IMF said in the foreword to the latest World Economic Outlook.
“With a synchronised slowdown and uncertain recovery, the global outlook remains precarious. At 3 per cent growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions,” she said.
Besides supporting growth, such actions can also help catalyse needed cooperative solutions to improve the global trading system, Gopinath said.
Released ahead of the annual meeting of the IMF and World Bank, Gopinath in the World Economic Outlook said that this subdued growth is a consequence of rising trade barriers and elevated uncertainty surrounding trade and geopolitics.
Idiosyncratic factors causing macroeconomic strain in several emerging market economies; and structural factors, such as low productivity growth and aging demographics in advanced economies are also responsible for this slow growth rate.
Global growth in 2020 is projected to improve modestly to 3.4 per cent, a downward revision of 0.2 per cent from its April projections, she said. The growth projection for 2019 is the slowest pace since the global financial crisis in 2008. However, unlike the synchronised slowdown, this recovery is not broad based and is precarious, she notes.
Growth for advanced economies is projected to slow to 1.7 per cent in 2019 and 2020, while emerging market and developing economies are projected to experience a growth pickup from 3.9 per cent in 2019 to 4.6 per cent in 2020.
About half of this is driven by recoveries or shallower recessions in stressed emerging markets such as Turkey, Argentina and Iran and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018 such as Brazil, Mexico, India, Russia and Saudi Arabia, the IMF chief economist said.
A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade, Gopinath said.