The International Monetary Fund (IMF) on Tuesday cut its global growth forecast to the lowest level since the financial crisis, warning of significant downside risks to the world economy including trade tensions, pockets of political instability, mounting debt levels and increasing inequality.
The IMF lowered its growth forecast for 2019 to 3.3 percent from the previous level of 3.5 percent in its latest World Economic Outlook (WEO).
This is the third time in six months that the fund has revised its outlook downward.
The IMF is projecting a decline in growth this year for 70 percent of the global economy.
“This is a delicate moment,” IMF Chief Economist Gita Gopinath said at a press briefing in Washington.
The WEO noted 3.3 percent expansion is “still reasonable”, but warned the outlook for many countries is still “challenging” given the potential for trade disputes to flare up. The IMF also cautioned growth in China “may surprise on the downside” and that the risks from Brexit “remain heightened”.
“It’s very important that policymakers do no harm and work cooperatively,” said Gopinath.
Gradual recovery expected
Despite the lowered forecast for 2019, the IMF expects the global economy to pick up in the second half of this year, thanks to more growth-friendly policies from central banks.
It left its forecast for 2020 unchanged at 3.6 percent predicated on a rebound in Argentina and Turkey, along with an improvement in other stressed emerging markets and developing economies.
Beyond 2020, the IMF predicts that global growth will stabilise at around 3.5 percent, buoyed mainly by growth in China and India.
Policymakers from around the world are gathering in Washington, DC this week for the biannual meetings of the IMF and World Bank.
It is “imperative that costly policy mistakes are avoided”, the IMF emphasised in this latest WEO as it urged greater cooperation among nations.
“There is a need for greater multilateral cooperation to resolve trade conflicts, to address climate change and risks from cybersecurity, and to improve the effectiveness of international taxation,” said the report.