IMF Cuts Global Growth Outlook Due To Trade Worries

The International Monetary Fund (IMF) cut its outlook for global growth to the lowest level since the global financial crisis a decade ago due to growing concerns about a global trade war. The IMF now predicts the world economy will grow 3.3 percent this year, down from the 3.5 percent the IMF had forecast for 2019 just this past January. That rate would be the weakest since 2009, when the world economy shrank.

It was the third time the IMF has downgraded its outlook in six months.

The global volume of trade in goods and services will increase 3.4 percent this year, weaker than the 3.8 percent gain in 2018 and down from the IMF’s January estimate of four percent.

IMF Managing Director Christine Lagarde warned the world economy faces a “delicate moment.” The IMF said it was particularly worried about the collapse of trade talks between the United States and Mexico and the possibility of Britain leaving the European Union without a transition agreement (that scenario is known as the “no-deal” Brexit scenario). The report said, “There is an uneasy truce on trade policy, as tensions could flare up again and play out in other areas (such as the auto industry) with large disruptions to global supply chains.”

The IMF reduced its forecast for U.S. growth to 2.3 percent this year, down 0.2 percentage points from its January forecast. It upgraded its U.S. forecast next year to 1.9 percent.

For Canada, the IMF’s estimate for growth in 2019 was 1.5 percent, down from the 1.9 percent predicted in January and the two percent growth predicted last October.

The IMF slashed its outlook for the euro area to 1.3 percent this year, down 0.3 point from three months ago, and its outlook for the United Kingdom to 1.2 percent this year, down 0.3 percentage points from three months ago.The IMF did raise its forecast for Chinese growth by 0.1 point to 6.3 percent this year.