IMF lowers global growth forecasts on trade, Brexit concerns

The International Monetary Fund (IMF) cut growth forecasts for the global economy for this year and next as it warned that an escalation of the China-US trade war or a hard Brexit could harm it further.

It forecast growth of 3.2% in 2019, down from its April estimate of 3.3%. Growth in 2020 was is set to pick up to 3.5% next year, below its earlier forecast of 3.6%.

The IMF raised its growth forecast for the UK this year to 1.3% from 1.2%.

“The principal risk factor to the global economy is that adverse developments - including further U.S.-China tariffs, U.S. auto tariffs, or a no-deal Brexit - sap confidence, weaken investment, dislocate global supply chains and severely slow global growth below the baseline,” the IMF said on Tuesday.

US growth for this year was upgraded to 2.6% from 2.3% to 2.6% but China was downgraded to 6.2% from 6.3%.

“In China, the negative effects of escalating tariffs and weakening external demand have added pressure to an economy already in the midst of a structural slowdown and needed regulatory strengthening to rein in high dependence on debt.”

“Multilateral and national policy actions are vital to place global growth on a stronger footing,” the IMF said.

“The pressing needs include reducing trade and technology tensions and expeditiously resolving uncertainty around trade agreements (including between the UK and the EU and the free trade area encompassing Canada, Mexico and the US). Specifically, countries should not use tariffs to target bilateral trade balances or as a substitute for dialogue to pressure others for reforms.”