Monday, 14 October, 2019

IMF's Managing Director: the global economy is going through a "synchronised slowdown"

Newly-installed International Monetary Fund Managing Director Kristalina Georgieva warns that the trade wars are having lasting impact on the global economy The IMF's new chief unveils data showing trade conflicts could wipe out $700 billion in global GDP by 2020
Steven Clarke | 09 October, 2019, 14:35

The new head of the IMF Kristalina Georgieva painted a downbeat picture of the world economy in her first major address in Washington on Tuesday, saying the fund will cut its growth forecast for both 2019 and 2020 in its next World Economic Outlook due October 15.

Referring to the impact of trade conflicts, she said that its cumulative effect could mean a $700 billion reduction in global gross domestic product (GDP) output by 2020, or around 0.8%.

The IMF's projection includes President Donald Trump's planned tariff hike on another $US300 billion worth of Chinese imports.

Much of the GDP losses will come from a decline of business confidence and negative market reactions, she said. Nearly 90 per cent of the world will face slower growth, she said on Tuesday. "The global economy is now in a synchronised slowdown".

The Managing Director of Worldwide Financial Fund (IMF) identified that the widespread deceleration signifies that progress this 12 months will fall to its lowest price because the starting of the last decade.

Bulgarian economist Georgieva was confirmed last month as Managing Director of the International Monetary Fund, becoming the first person from an emerging economy to head the global lender.

Her warning comes ahead of the crucial trade talks between USA and China, scheduled later this week.

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She noted that because of trade tensions "worldwide manufacturing activity and investment have weakened substantially", which is liable to have knock-on effects on the services sector. "Start by unleashing the growth generating capacity of trade", she said.

"Trade uncertainty is an important factor in the slowdown", Mr. Malpass said in an interview with The Wall Street Journal, but "growth could accelerate if the nontrade aspects of this were improved".

Georgieva made this evaluation every week forward of the joint Annual Assembly between the International Monetary Fund and World Financial institution (WB) through which each establishments will current their financial projections in a gathering of prime central bankers and economic system ministers.

The IMF chief's statement came even as the Reserve Bank of India (RBI) said that the Indian economy which has largely been subdued in the past few quarters and signs of a slowdown have cropped up, is likely to face several more risks in the near term. "Yet across advanced economies, including in the US, Japan, and especially the Euro area, there is a softening of economic activity", she said. Brexit was named as one of the factors slowing down the world economy.

The lasting solution to the trade conflicts will require co-operation from all countries, Ms. Georgieva said.

The headline numbers reflect a complex situation, she said.

She called on Germany, the Netherlands and South Korea to increase fiscal spending to support growth, but said such spending was not appropriate for all countries since public debt remained near record levels.

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