IMF Predicts Global Economy Will Rebound in 2020 -- update
January 20 2020 - 10:25AM
Dow Jones News
By Josh Zumbrun
The global economy is poised for a modest rebound in 2020,
following a year in which it notched the weakest growth since the
financial crisis.
Global gross domestic product will expand by 3.3% in 2020, up
from 2.9% in 2019, the International Monetary Fund predicted in a
quarterly update to its World Economic Outlook, released Monday in
Davos, Switzerland.
The improved outlook is driven by a combination of aggressive
monetary policy easing in 2019 and detente in America's nearly
two-year trade war with China.
One of the biggest surprises last year was the collapse in the
global volume of trade in goods and services, which went beyond
just the U.S. and China to drag down trade activity and investment
across much of the world. Global trade growth slowed to 1% in 2019
from 3.7% in 2018.
The IMF expects that to reverse in the year ahead, with trade
volumes rising 2.9% in 2020.
"On the positive side, market sentiment has been boosted by
tentative signs that manufacturing activity and global trade are
bottoming out, a broad-based shift toward accommodative monetary
policy, intermittent favorable news on U.S.-China trade
negotiations, and diminished fears of a no-deal Brexit," the IMF
said in its report.
The IMF characterized the signs of stabilization as "tentative,"
saying that renewed trade tensions could "undermine the nascent
bottoming out of global manufacturing and trade, leading global
growth to fall short of the baseline."
Much of the hope for the global economy depends on the phase-one
U.S.-China trade deal remaining intact and not collapsing into new
tariff escalations.
In remarks Friday at the Peterson Institute for International
Economics, IMF Managing Director Kristalina Georgieva said the deal
is "certainly good news, but is not sorting out all the
complexities of issues between these two large economies."
Ms. Georgieva said the trade tensions are costing the world
economy 0.8% of global gross domestic product -- meaning GDP will
be $700 billion lower in 2020 than it would have been without the
trade war. Of that loss, just a third of the amount is due to
tariffs and the rest reflects companies not investing, the IMF
estimates.
"We have some reduction of this uncertainty, but it is not
eliminated," Ms. Georgieva said. "Trade truce is not the same as
trade peace."
The IMF forecasts that both the Chinese and American economies
will slow in 2020. They expect the U.S. to grow 2% in 2020, down
from 2.3% in 2019. China's rate will slip to 6% in 2020 from 6.1%
in 2019. China's forecast would have slowed more sharply, the IMF
noted, without the trade deal.
For both the U.S. and China, the IMF has long predicted a
slowdown for factors unrelated to the trade war. The U.S. economy
has been expected to slow as some of the boost from a 2017 tax
overhaul fades, while China's economy has been slowing for years
amid the aging of its population, and a shift away from debt-driven
infrastructure building, among other factors.
Notable improvements in growth are forecast for a number of
major emerging markets: Brazil, India, Mexico, and Russia are
expected to see growth accelerate in 2020, by about a full
percentage point in each country.
While the collapse in global trade sharply reduced growth last
year, it was partially counteracted by global monetary policy
makers, such as the Federal Reserve, which cut its target interest
rate three times in 2019. The IMF said that without such stimulus,
the figures for global growth in 2019 and 2020 would be 0.5
percentage point lower in each year.
--Harriet Torry contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
January 20, 2020 10:10 ET (15:10 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.