IMF sees the global economy slowing and is urging leaders around the world to handle this ‘delicate moment’ with care, the Fund’s chief economist Gita Gopinath says ahead of the launch of the World Economic Outlook Tuesday, April 9 in Washington.
“The global expansion continues to weaken. For 70 percent of the global economy we are projecting weaker growth for 2019 relative to 2018. We expect a recovery in 2020. However we do see significant downside risks,” said Gopinath, the new Chief Economist and first woman to hold that position at the IMF.
Trade tensions and tight financial conditions at the end of 2018 were the biggest factor lowering the outlook, she said.
“A major risk continues to be in trade tensions. Now, we've seen an improvement with respect to trade talks between US and China. However we are concerned that trade tensions could escalate and it could show up in other sectors like the auto sector which could be very damaging for global growth.”
While growth is slowing, there are ways that policymakers can shore up growth in the medium term and reduce the risk of a serious drop off, Gopinath said.
“This is a delicate moment for the global economy. It's very important that policymakers do no harm and work cooperatively to reduce the high levels of policy uncertainty in the world especially with regard to trade policy.”
She added, “It's also very important that macro-prudential tools are used in place to make sure the financial risks are not building up, and fiscal policy will have to manage important trade-offs between demand growth and at the same time making sure that the debt remains sustainable.”