The International Monetary Fund (IMF) has downgraded its global growth forecasts and said there are “no clear signs of a turning point” for the world economy despite the signing of a US-China trade deal and more clarity over Brexit.
In the latest of a series of downgrades, the IMF said it expects global growth for 2019 to come in at just 2.9 per cent. This is lower than its previous three per cent prediction, which would have already been the worst figure since the global financial crisis.
The international lender of last resort predicted global growth will pick up to 3.3 per cent this year, down from a previous prediction of 3.4 per cent. It foresaw growth in 2021 of 3.4 per cent.
However, the same report said the UK will be the fastest-growing European economy in the G7 this year and next.
The IMF predicted the UK economy grew 1.3 per cent in 2019, its slowest since the crisis, and will grow 1.4 per cent and 1.5 per cent in 2020 and 2021 respectively. This puts British growth expectations third out of the G7 countries for 2020.
The report came as world leaders and business figures prepared to jet into the World Economic Forum in Davos, Switzerland. Sluggish global growth and geopolitical tensions can be expected to be a key topic at the elite meeting.
IMF chief economist Gita Gopinath – who will give one of the opening speeches at Davos – said the downgrades “owed largely to downward revisions for India”. She added: “The projected recovery for global growth remains uncertain. It continues to rely on recoveries in stressed and underperforming emerging market economies.”
The IMF update said that the signing of the “phase one” trade deal between the US and China last week is expected to ease pressure on trade volumes, while the Brexit agreement struck between the UK and EU has also diminished some concerns about Europe.
The report added that there are some signs that “the decline in manufacturing and trade may be bottoming out”. It highlighted the services sector as an area of resilience, boosted by consumer spending that has been supported by sustained wage growth.
Nonetheless, the Washington-based organisation said that “the risks to the global economy remain on the downside”. It added that, with interest rates close to record lows around the world, there are fewer tools to tackle a downturn. The IMF said a “coordinated fiscal response” may well be required to halt a decline.
The report renewed the IMF’s call for international cooperation to “lift growth and spread prosperity”. In particular, the organisation said countries need to break the impasse over the World Trade Organization’s dispute-settling body, to which the US has blocked appointments.
Gopinath said: “While there are signs of stabilisation, the global outlook remains sluggish and there are no clear signs of a turning point.”
“There is simply no room for complacency, and the world needs stronger multilateral cooperation and national-level policies to support a sustained recovery that benefits all.”