Global growth to slow in 2019 and 2020
29 Jul 2019
The International Monetary Fund (IMF) has trimmed its projected rates for
world growth to 3.2% in 2019 and 3.5% in 2020.
While this is a modest revision of 0.1 percentage points (ppts) relative to
its projections in April, the cuts come on top of previous downward
revisions. In January 2019, the IMF’s predicted rates were 3.5% in 2019 and
3.6% in 2020.
The latest revisions reflect a major cut of 0.3 ppts for emerging market
and developing economies. This offsets a small revised growth rate of 0.1
ppts for advanced economies.
Looking forward, world growth is expected to improve in 2020. However, the
IMF has warned most of the forecast increase relies on an improvement in
stressed emerging market and developing economies. It is therefore subject
to high uncertainty.
‘Risks to the forecast are mainly to the downside,’ the IMF noted.
Subdued growth for advanced economies
For advanced economies, growth remains subdued in 2019 and 2020.
In the US, growth in 2019 is expected to be 2.6% (0.3 ppts
higher than the IMF’s forecast in April), moderating to 1.9% in 2020 as the
fiscal stimulus unwinds. The revised 2019 figure reflects a
better-than-anticipated performance in recent months. While the headline
number was robust due to strong exports and inventory accumulation,
domestic demand was slightly weaker than expected and imports softer, in
part reflecting the effect of tariffs.
Average growth in the Euro area is projected at 1.3% in
2019 and 1.6% in 2020. The forecast for 2019 is revised down slightly for
Germany due to weaker-than-expected external demand. The forecast is
unchanged for France where fiscal measures are expected to support growth.
The negative effects of street protests are also dissipating.
’s GDP is predicted to expand at 1.3% in 2019 and 1.4% in 2020 (0.1 ppts
higher in 2019 than forecast in April). The IMF noted the upward revision
in 2019 reflects a stronger-than-anticipated first quarter outcome boosted
by pre-Brexit inventory accumulation and stockpiling. However, this is
likely to be partially offset by payback over the remainder of the year.
’s economy is forecast to grow by 0.9% in 2019, which was 0.1 ppts less
than expected in the April report. Growth is projected to slow to 0.4% in
2020, with fiscal measures anticipated to mitigate the negative impact on
consumer spending from the upcoming October 2019 hike in the consumption
tax rate (from 8% to 10%).
Growth rates cut in emerging market and developing economies
In emerging market and developing economies, growth has been revised down
by 0.3 ppts to 4.1% in 2019 and by 0.1 ppts to 4.7% in 2020.
’s economic outlook continues to be affected by tariffs on trade and
investment, adding to the woes of a structural slowdown. India’s economy was clouded by weaker-than-expected
domestic demand. The growth rates are expected to be around 6% for China
and about 7% for India in both 2019 and 2020.
The IMF has sharply cut its growth projections for Latin America by 0.8 ppts to 0.6% in 2019. The Fund points
to the mostly individual problems in countries such as Brazil, Mexico and
particularly Venezuela for the broader downturn.