International Monetary Fund cuts global growth forecast to 3.3% for 2019


The improved outlook by the International Monetary Fund comes as trade relations look to be improving between the two largest economies in the world since China and USA came to a truce in their months-long trade war last December. The report explained that growth in MENAP region was expected to decline to 1.5pc in 2019, before recovering to about 3.2pc by 2020.

The projected recovery in the second half of 2019 is based on an ongoing build-up of policy stimulus in China, recent improvements in global financial market sentiment, the waning of temporary drags in the Eurozone, for instance in Germany and Italy, and a gradual stabilisation of conditions in stressed emerging market economies such as Argentina and Turkey - both of which suffered steep currency devaluations and economic downturns in 2018.

"This is a delicate moment", Gita Gopinath said at a press briefing in Washington.

Global trade growth has slowed sharply from its peak in late 2017, and expectations for future business activity have weakened, pointing to slowing momentum ahead, the International Monetary Fund said. This has been done taking into consideration other downside risks, including a possibility of tensions related to trade flaring up again, and possible disruptions in global supply chains of industries. The Indian central bank had carried out two back-to-back rate cuts of 25 basis points each this year to boost growth. -China agreement to resolve their trade disputes.

That move was welcome as it has offset "some of the downside risks that were building up towards the end of 2018", she said. "We mentioned rising inflation, which is a concern; you have inflationary pressure in the economy and that, to some extent, derives from the difficulties that the (Zambian) government is under to control its fiscal position", Kambou said.

It blamed the slowdown on the trade spat and tariff hikes between the United States and China, besides "a decline in business confidence, a tightening of financial conditions, and higher policy uncertainty across many economies".

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The IMF downgraded the outlook for Mexico sharply, cutting a half point off the estimate to 1.6 percent this year and 1.9 percent in 2020. The bruising trade war with the United States is taking a toll. The IMF said growth in India is expected to stabilize at just under 7.75% over the medium term, based on the continued implementation of structural reforms and easing of infrastructure bottlenecks.

The IMF notes that after strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of a year ago, reflecting a confluence of factors affecting major economies. Were that to happen, the report said, the USA would look to Canada as one of its main sources for importingmachinery and electronics.

The agency also cut its global growth estimate for 2019 to 3.3 per cent from 3.5 per cent, while leaving its 2020 outlook unchanged at 3.6 per cent.

Cuts 2020 China forecast to 6.1% from 6.3%.

The post-2020 growth stabilization, Gopinath said, is "bolstered mainly by growth in China and India and their increasing weights in world income". Across sub-Saharan Africa and the MENAP region, 41 economies, accounting for around 10pc of the global GDP in purchasing-power-parity terms and close to one billion in population, are projected to grow by less than advanced economies in per capita terms over the next five years, implying that their income levels are set to fall further behind those economies.

"It's very important that policymakers do no harm and work cooperatively", said Gopinath.