IMF Lowers 2019 Global Growth Forecast
January 21 2019 - 8:29AM
Dow Jones News
By Josh Zumbrun
The global economy is starting the year on weaker footing,
according to new quarterly forecasts from the International
Monetary Fund.
The IMF cut its forecasts for global growth in 2019 to 3.5% from
3.7% in previous forecasts released in October and from the 3.9% it
had expected in July.
In the earlier forecasts the IMF had characterized growth as
"plateauing" but now has conceded that the "global expansion has
weakened."
The IMF's forecast has been pulled down in particular by poor
economic performance out of Europe. Germany's growth forecast for
this year was cut 0.6 percentage points due to weak consumption and
industrial production data; Italy was cut by 0.4 points due to weak
domestic demand and high government borrowing costs; and France was
cut by 0.1 points due to the impact of ongoing street protests.
Many emerging markets also saw their forecasts fall, including
Mexico, where private investment has been weak; energy-exporting
economies that are pinched by the recent drop in oil prices; and
Turkey, which the IMF expects to undergo a contraction after
suffering an abrupt currency crisis last year.
The forecast was unchanged for the world's two largest
economies, the U.S. and China. But the IMF had previously forecast
that both economies would slow -- each by 0.4 points -- in 2019
compared with the previous year.
Financial markets have been closely focused on the weakening
global growth backdrop, a key driver of the decline in stocks
during the last three months of 2018. The new update to the IMF's
World Economic Outlook, released by the IMF at a press briefing in
Davos, Switzerland, includes reason to keep worrying.
The IMF sees several risks. At the top of the list are global
trade tensions. The Fund said it welcomed the recent temporary
truce between the U.S. and China, but said "the possibility of
tensions resurfacing in the spring casts a shadow over global
economic prospects."
The Fund also cited a number of reasons to worry about
financial-market stability, including Italian fiscal policies, the
partial U.S. government shutdown and the risk of a messy Brexit as
the U.K. struggles to negotiate its divorce from the European
Union.
But the forecasts, which are the first to be produced under the
leadership of the Fund's new chief economist, Gita Gopinath, aren't
entirely dire. Although 3.5% growth is a slowdown from the past two
years, it is stronger than the 3.2% recorded in 2016, and still
would represent a world economy that is expanding.
Forecasts were raised slightly for two major economies, India
and Japan, and many of the sources of concern are self-inflicted
wounds from political dysfunction, such as trade tensions between
the U.S. and its trading partners, the U.S. shutdown, the U.K.'s
Brexit and Europe's domestic strife.
"The main shared policy priority is for countries to resolve
cooperatively and quickly their trade disagreements," the IMF
said.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
January 21, 2019 08:14 ET (13:14 GMT)
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