Global growth is set to fall to its slowest rate since the financial crisis this year, the IMF said on Tuesday, as it warned that the self inflicted wounds of the US and China’s trade war had created a “precarious” economic situation.Tit-for-tat tariffs have chilled business confidence and investment, the fund said, leaving global trade in goods almost stagnant and forcing central banks to cut interest rates to shore up growth.
There is an urgent need to cease hostilities and restore confidence to the global outlook, the IMF said in its twice-yearly World Economic Outlook, in pointed comments directed at US President Donald Trump’s administration. Gita Gopinath, the fund’s chief economist, said: “With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot.
“As policy priorities go, undoing the trade barriers put in place with durable agreements and reining in geopolitical tensions top the list,” she added. “Such actions can significantly boost confidence, rejuvenate investment, halt the slide in trade and manufacturing and raise world growth.” The world economy will grow only 3 per cent in 2019, theIMF estimated, down from 3.8 per cent as recently as 2017 and0.3 percentage points below its equivalent forecast six months ago. This is the slowest rate of expansion since the global recession of 2009.
The trade wars started in early 2018 by the US will leave global output o.8 per cent lower in 2020 than it could have been, had more internationalist policies been followed, the IMF said. If the world’s central banks had not acted quickly to loosen monetary policy, output would have been a further 0.5 per cent weaker.
The IMF predicted that the global economy would improve next year, growing at a rate of 3-4 per cent, but this forecast is entirely dependent on recoveries in highly-stressed economies such as Turkey, Argentina and Iran and improvements in {!lobal weak spots such as Mexico, Brazil and Russia.