International Monetary Fund revises down global growth forecast

A man walks past the International Monetary Fund headquarters in Washington DC on 5 September 2018

The IMF yearly World Economic Outlook, set to be released on Monday, will project improvement in the coming years, with the IMF having estimated the recent trade rows cost the world economy about $700 billion or an 0.8 percent reduction in collective gross domestic product.

Eurozone growth also was marked down 0.1 percentage point from October, to 1.3% for 2020, largely due to a manufacturing contraction in Germany and decelerating domestic demand in Spain.

"After slowing to 4.7 percent in 2019, growth in ASEAN-5 countries is projected to remain stable in 2020 before picking up in 2021". These early signs of stabilization could persist and eventually reinforce the link between still-resilient consumer spending and improved business spending.

The financial institution stated that the growth of Nigeria, Angola and South Africa (the three largest economies in the region) were subdued in 2019, below historical averages and contracting for a fifth consecutive year on a per capita basis.

Chief Economist Gita Gopinath, on January 20, said India is the biggest contributor to the downward revision in growth projections for emerging market and developing economies.

Despite the cuts for India, it is the second-fastest growing major economy after China this year and the next, and it is expected to overtake China in 2021, according to the WEO update.

"We have not reached a turning point yet", International Monetary Fund managing director Kristalina Georgieva told a news conference on the eve of the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, Reuters reported.

Despite several headwinds, International Monetary Fund said some indications have emerged towards the year-end that global growth may be bottoming out.

"We project global growth to increase modestly from 2.9% in 2019 to 3.3% in 2020 and 3.4% in 2021. The reality is that global growth remains sluggish". Instead, the IMF said 2020 USA growth would be 0.1 percentage point lower than forecast in October, at 2.0% because of the fading stimulus effects from 2017 tax cuts and the Federal Reserve's monetary easing.

Gopinath said there was stress in non-banking financial corporations.

However, few signs of turning points are yet visible in global macroeconomic data.

Providing an update to the World Economic Outlook (WEO) ahead of the inauguration of the World Economic Forum (WEF) annual summit here, the fund also revised downwards its forecast for India to 4.8 per cent for 2019. The report, however, warned that downside risks remain prominent, including rising geopolitical tensions, notably between the United States and Iran, intensifying social unrest, further worsening of relations between the USA and its trading partners and deepening economic friction between other countries.



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