New IMF chief warns of 'synchronised slowdown' in global growth

Nellie Chapman
October 9, 2019

For the global economy, the cumulative effect of trade conflicts could mean a loss of around United States dollars 700 billion by 2020, or about 0.8 per cent of GDP, she said, which is far higher than the fund previously forecast as its worst case scenario.

U.S. President Donald Trump has insisted that the U.S. economy has not been affected by the higher tariffs he has imposed on China and other nations, which have triggered retaliatory tariffs on U.S. goods.

Trade wars around the world have a strong negative impact on global economic growth.

"In 2019, we expect slower growth in almost 90 per cent of the world", Georgieva said during her speech on Tuesday.

"Two years ago, the global economy was in a synchronized upswing".

IMF Managing Director Kristalina Georgieva said that an updated IMF forecast to be released next week will show growth falling to its lowest point since the beginning of this decade.

During her speech, the Bulgarian economist, who succeeded Christine Lagarde, said that the trade tensions had "substantially weakened" manufacturing and investment activity worldwide.

"That means dealing with subsidies, as well as intellectual property rights and technology transfers", she said, adding that a modernised trading system would unlock the potential of services and e-commerce.

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"Everyone loses in a trade war", she said.

The Reserve Bank of India on Friday lowered India's GDP growth estimate for the year to 6.1 per cent from the earlier figure of 6.9 per cent due to the on-going period of economic slowdown. "The global economy is now in a synchronized slowdown", Georgieva stated on Tuesday in her curtain raiser speech for the International Monetary Fund and World Financial institution's annual assembly right here subsequent week.

Describing climate Change as a crisis where no one is immune and everyone has a responsibility to act, she said one of its priorities was to assist countries as they reduce carbon emissions and become more climate resilient.

The precarious outlook will affect many countries caught in the crossfire of trade conflicts, including struggling emerging markets with International Monetary Fund programmes, she added. "So we need to work together, now, and find a lasting solution on trade".

In her evaluation, Georgieva argued that financial exercise is softening in superior economies, such because the US, Japan and, particularly, the eurozone, whereas in different rising markets, similar to India and Brazil, the slowdown is much more pronounced this yr.

While trade tensions had been talked about as a danger to the economy, "now, we see that they are actually taking a toll", she said.

"The key is to improve the system, not abandon it", 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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