No turning point in sight as IMF predicts sluggish global growth – Umang

WASHINGTON: Global growth seems to have bottomed out, but there is no uptick in sight and the risks from commercial tensions to climate shocks make prospects uncertain, a senior official of the International Monetary Fund (IMF) said on Monday. ).

IMF prediction 2020 sluggish global growth

By 2020 and 2021, the IMF cut its global growth forecasts, mainly due to a sharper than expected slowdown in India and other emerging markets, even when it said that a trade agreement between the United States and China added to hopes that The activity was bottoming out.

With the trade wars weighing on exports and investment, the world economy expanded 2.9 percent last year, its slowest pace since the global financial crisis, despite the almost synchronized central bank relaxation it added. half a percentage point to global growth.

“We have not yet reached a turning point,” IMF managing director Kristalina Georgieva said at a press conference on the eve of the annual World Economic Forum (EMF) meeting at the Swiss ski resort in Davos. “The reality is that global growth is still slow.

“Right in the first weeks of the new year, we have witnessed an increase in geopolitical tensions in the Middle East and have seen the dramatic impact that climate shocks could have. We saw them in Australia and parts of Africa. ” The IMF now sees 3.3pc growth this year, below its October projections for 3.4pc and also reduced the 2021 forecast to 3.4pc from 3.6pc.

The reductions reflect the reassessment of the IMF’s economic outlook for several major emerging markets, particularly India, where domestic demand has slowed more sharply than expected amid credit crunch and stress in the non-banking sector.

The IMF also said it reduced growth forecasts for Chile due to social unrest and for Mexico, due to continued weakness in investment.

The Fund said that a decrease in tensions between the United States and China, which had slowed GDP growth in 2019, had fueled market sentiment, amid “tentative” signs that trade and manufacturing were bottoming out.

Boost China, not us

The Fund’s cautious perspective assumes that there are no additional crises in trade tensions between the United States and China, but Georgieva warned that the root cause of the problem has not yet been resolved.

“The underlying causes of the commercial tensions and the fundamental problems of the reform of the commercial system are still with us.” The IMF improved the 2020 growth forecast for China by 0.2 percentage points to 6pc because the US trade agreement included a partial tariff reduction and canceled tariffs on Chinese consumer goods that had been scheduled for December. These had been incorporated into previous IMF forecasts.

But the Fund did not give a boost to its US growth forecast. UU. For China’s promises to increase purchases of US goods and services by $ 200 billion in two years. Instead, the IMF said the 2020 growth in the US. UU. It would be 0.1pps lower than expected in October, at 2pc due to the stimulus effects that fade from the 2017 tax cuts and the monetary relaxation of the Federal Reserve.

The growth of the euro zone also fell 0.1pps from October, to 1.3pc by 2020, largely due to a manufacturing contraction in Germany and the slowdown in domestic demand in Spain.

India saw a sharp 1.2pps cut in its growth forecast for 2020 to 5.8pc, the largest IMF reduction for any emerging market, due to the internal credit crunch. The monetary and fiscal stimulus is expected to raise the country’s growth rate to 6.5pc in 2021, although it is still 0.9pps lower than expected in October.

Other emerging markets recorded low forecasts, said the IMF, including Chile, which has been affected by social unrest. Mexico will grow only 10pc in 2020, below the 1.3pc forecast in October.

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