|
|
In an update of its World Economic Outlook, published on Tuesday, the fund was slightly more pessimistic than it had been in April on prospects for this year and next, forecasting that global growth would slow to 3.2 per cent in 2019 — the weakest rate of expansion for a decade — before picking up to 3.5 per cent in 2020.
The projected pick-up was “precarious”, the IMF said, relying on progress in resolving differences over trade policy, as well as a stabilisation in troubled economies such as Turkey and Argentina.
It listed a no-deal Brexit as one of the main events that could throw the global economy off-course.
This is seen as an increasingly plausible outcome, as Boris Johnson, who is set to become Britain’s new prime minister on Wednesday, has ruled out compromise on the terms of withdrawal, and pledged to leave the EU on October 31 “deal or no deal”.
“The principal risk factor to the global economy is that adverse developments — including further US-China tariffs, US auto tariffs or a no-deal Brexit — sap confidence, weaken investment, dislocate local supply chains and severely slow global growth below the baseline,” the IMF said.
To place growth on a stronger footing, it would be vital to resolve uncertainty around trade agreements, the fund added — including between the UK and EU, as well as the free trade area encompassing Canada, Mexico and the US. Policy mis-steps and the associated uncertainty would have a “severely debilitating effect” on sentiment, growth and jobs, it said, adding in an unmistakable reference to the US president’s trade policy, that “countries should not use tariffs to target bilateral trade balances”.
It also underlined concerns that a sudden outbreak of risk aversion in global markets “could expose financial vulnerabilities accumulated during years of low interest rates”, putting strain on highly leveraged borrowers and indebted governments. [...]
Full article on Financial Times
World Economic Outlook Update, July 2019: Still Sluggish Global Growth