IMF lowers global growth forecast for 2019, warns of downside risks

0 Comment(s)Print E-mail Xinhua, April 10, 2019
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Region-specific projections

The WEO report expected growth rates in the euro zone to be 1.3 percent in 2019 and 1.5 percent in 2020, both lower than the 2018 and 2017 results.

EU-wide, downside risks include a protracted period of elevated bond yields in Italy that would weigh on economic activity and worsen debt dynamics, the rising possibility of Britain leaving the EU without a deal, as well as "European Parliamentary election outcomes that delay or reverse progress on strengthening the euro area architecture," according to the report.

A no-deal Brexit that "severely disrupts supply chains and raises trade costs could potentially have large and long-lasting negative impacts on the economic well-being of the United Kingdom and the European Union," said the report.

Asked at the press conference to comment on the state of the Italian economy, Gopinath said the European country's growth in the second half of 2018 was particularly weak, and that weakness carried over into 2019.

High levels of debt as well as sovereign borrowing costs will be reflected in weaker investment and will remain concerns for Italy, "especially given that growth in Italy is weak not just in real terms, but in nominal terms," she said.

With regard to the United States, it projected that the economy will grow by 2.3 percent in 2019, and expand at a lower rate of 1.9 percent in 2020.

The report said the market-implied path of expected policy rates remains below the U.S. Federal Reserve's projections, "raising the possibility of a market reassessment of the expected policy path if U.S. economic data remain strong."

"This could result in higher U.S. interest rates, renewed dollar appreciation, and tighter financial conditions for emerging market and developing economies with balance sheet vulnerabilities," the report said.

For China, the growth rate is forecast to be 6.3 percent in 2019, up 0.1 percentage point from its previous estimation in January. The Chinese economy is forecast to expand by 6.1 percent in 2020.

The post-2020 growth stabilization, Gopinath said, is "bolstered mainly by growth in China and India and their increasing weights in world income."

Growth in emerging market and developing economies will stabilize at 5 percent, with emerging economies in Asia continuing to grow faster than other regions, she added.

To prevent the downside risks from materializing, Gopinath urged the building of more inclusive economies, adding that "costly policy mistakes" should be avoided.

"Policymakers need to work cooperatively to help ensure that policy uncertainty doesn't weaken investment," she said. "Across all economies, the imperative is to take actions that boost potential output, improve inclusiveness, and strengthen resilience."

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