Global economic outlook dips, Canada’s unchanged: IMF
The International Monetary Fund is further downgrading its outlook for the world economy, predicting that growth this year will be the weakest since the 2008 financial crisis primarily because of widening global conflicts.
The IMF’s latest World Economic Outlook foresees a slight rebound in 2020 but warns of threats ranging from heightened political tensions in the Middle East to the threat that the United States and China will fail to prevent their trade war from escalating.
Its 2019 projection for Canada foresees economic growth of 1.5 per cent, rising to 1.8 per cent growth in 2020 — down from the previous estimate of 1.9 per cent growth in 2020. Both estimates are down from the 1.9 per cent growth experienced by Canada in 2018.
The updated forecast released Tuesday was prepared for the fall meetings this week of the 189-nation IMF and its sister lending organization, the World Bank. Those meetings and a gathering Friday of finance ministers and central bankers of the world’s 20 biggest economies are expected to be dominated by efforts to de-escalate trade wars.
The new forecast predicts global growth of 3.0 per cent this year, down 0.2 percentage point from its previous forecast in July and sharply below the 3.6 per cent growth of 2018. For the United States this year, the IMF projects a modest 2.4 per cent gain, down from 2.9 per cent in 2018.
Next year, the fund foresees a rebound for the world economy to 3.4 per cent growth but a further slowdown in the United States to 2.1 per cent, far below the 3.0 per cent growth the Trump administration projects.
IMF economists cautioned that even its projected modest gains might not be realized.
“With a synchronized slowdown and uncertain recovery, there is no room for policy mistakes, and an urgent need for policymakers to co-operatively de-escalate trade and geopolitical tensions,” Gita Gopinath, the IMF’s chief economist, said in the report.
Last week, the United States and China reached a temporary cease-fire in their trade fight when President Donald Trump agreed to suspend a tariff hike on US$250 billion of Chinese products that was to take effect this week.
But with no formal agreement reached and many issues yet to resolved, further talks will be needed to achieve any meaningful breakthrough. The Trump administration’s threat to raise tariffs on an additional $160 billion in Chinese imports on Dec. 15 remains in effect.
The IMF’s forecast predicted that about half the increase in growth expected next year will result from recoveries in countries where economies slowed significantly this year, as in Mexico, India, Russia and Saudi Arabia.
This year’s slowdown, the IMF said, was caused largely by trade disputes, which resulted in higher tariffs being imposed on many goods. Growth in trade in the first half of this year slowed to 1%, the weakest annual pace since 2012.
