IMF slashes 2019 global GDP forecast
The world's economic watchdog took an axe to its near-term forecasts for global growth for the third time in six months, warning that the outlook for a projected recovery in growth was "precarious".
In its 2019 World Economic Outlook, the International Monetary Fund slashed its prediction for the rate of growth in global GDP in 2019 by 0.4 percentage points to 3.3% and that for 2020 by 0.1 percentage points to 3.6%.
Underpinning the Fund's forecast for a pick up in growth were the anticipated buildup in policy stimulus in China, the bounce back seen recently in global financial market sentiment, waning temporary drags on the Eurozone and a stabilisation in emerging economies that were currently "under stress", such as Argentina and Turkey.
Past 2020, global growth was seen plateauing at 3.6% as China and India grew in size, growing more rapidly than slower advanced and emerging economies.
Nonetheless, further trade tensions and the uncertainty around policy that they create "could further weaken growth," the IMF said, emphasising financial conditions as a key channel of transmission.
Among the potential triggers of such weakness were a no-deal Brexit, persistently weak data and "prolonged fiscal uncertainty and elevated yields in Italy—particularly if coupled with a deeper recession—with possible adverse spillovers for other euro area economies."
"In the face of significant financial vulnerabilities associated with large private and public sector debt in several countries, including sovereign-bank doom loop risks (for example, in Italy), there could be a rapid change in financial conditions owing to, for example, a risk-off episode or a no-deal Brexit," the Washington-based lender said.
Strikingly, albeit less immediately, the IMF also called attention to the "bleak" prospects for convergence between 41 emerging nations and developed countries.
"Over the medium term, climate change and political discord in the context of rising inequality are key risks that could lower global potential output, with particularly severe implications for some vulnerable countries," the IMF added.