The IMF has trimmed its forecasts for global economic growth this year, casting a shadow over the opening of the World Economic Forum in the Swiss resort of Davos. Organizers of the annual gathering of the rich and powerful had wanted this year’s event to promote a more cohesive and sustainable world, hoping to urge companies to embrace stakeholder capitalism rather than simply pursue profits. But the latest signs of economic fragility will force global leaders and chief executives to tackle the more immediate challenges of restoring growth and confidence, rather than focusing on how to address climate change.
Ahead of the start of the WEF on Tuesday, the IMF cut slightly its global economic growth forecast for 2020 from 3,4 percent in October to 3.3 percent and reduced the forecast for next year from 3.6 percent to 3,4 percent. These figures are only a little better than the 2.9 percent achieved in 2019, the worst year for the global economy since the financial crisis more than a decade ago. The IMF also praised the speedy actions of central banks to loosen monetary policy, saying global growth would have been 0.5 percentage points lower had the Federal Reserve, European Central Bank, and others not cut interest rates in the second half of last year.
Calling the 71 interest rate cuts by 49 central banks last year “the most synchronized monetary easing since the global financial crisis”, Kristalina Georgieva, IMF managing director, said that without them, “we would have technically been talking about recession”. Separately, the PwC annual survey of chief executives, launched in Davos on Monday, revealed concerns about the global economic backdrop, with corporate leaders saying their own companies’ prospects were under more pressure than at any time in 11 years.
More than half of the almost 1,600 chief executives from 83 countries that participated in the survey forecast a decline in the rate of economic growth in 2020, up from 29 percent in last year’s survey and only s percent in 2018. Expectations of recoveries in large emerging economies such as Brazil, India, Mexico, Turkey and Russia had raised hopes of improved growth in 20 20. But the view of the IMF is that they are unlikely to make up for lost ground and generate the rapid levels of growth they have previously enjoyed in good years.